Why Unprofitable Companies Are Winning in 2020

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The bottom line is the most important part of any functioning business.
Profit after costs, expenses, and taxes.
The money that the founders and investors in companies get to put back into their pockets for the risk and effort they put into a business.
Sounds like business 101 right? And it kind of is.
A business that doesn’t turn a profit is like a freezer that kind make ice, it’s more or less pointless.
And sure there are things like non-profit charity organizations out there but most businesses exist to make money!
So why is it that some of the biggest companies in the world are not turning profits? Why is it that they don’t even plan to?
The rise of so-called zombie companies or companies that have not and have never run at a profit are raising more and more eyebrows in the investing world.
These businesses are getting too big to ignore as by some estimates over 10% of the s&p500 (an index of the largest companies in America), is now made up of these companies that don’t serve the one central goal of being in businesses.
What’s more, is that this issue is not just endemic to a particular industry, dozens of major companies and countless smaller businesses in every sector of the economy from energy, retail, medical, telecommunications, and of course technology are in this profitless boat together.
So what is going on here?
Why would anybody invest in a business that is unprofitable?
What impacts does this apparent misallocation of resources have on the economy?
And finally,
Will the economic fallout of 2020 show these businesses for what they really are?

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Reacties

  1. Prof Von Shredder
    Prof Von Shredder
    8 uur geleden

    Keep in mind that if you have a private company (e.g. founders invested their own money)... it can remain a very good business for a long time while making ZERO profit. IF the founders can take LARGE SALARIES. And they deserve those big 💵 💵 since they have tied up their own cash 💰

  2. Faye Ming-Flagit
    Faye Ming-Flagit
    8 dagen geleden

    10:50 "myriad" is an adjective

  3. Shashank Kumar
    Shashank Kumar
    11 dagen geleden

    When billionaires have FOMO, they invest in such companies.

  4. Tom austin
    Tom austin
    12 dagen geleden

    Maybe they are doing something illegal

  5. BINANCE CRYPTO
    BINANCE CRYPTO
    13 dagen geleden

    I have been investing with mr Chris Russ, I came across some nice comments about him here on NLlike and I gave him a try and honestly I didn't regret the move

    1. BINANCE CRYPTO
      BINANCE CRYPTO
      13 dagen geleden

      W•H•A•T•S•A•P•P•+

  6. Theo Bolt
    Theo Bolt
    13 dagen geleden

    The word immoral comes to mind. But then again, I'm old fashioned.

  7. Boof Dagyon
    Boof Dagyon
    14 dagen geleden

    So what you're saying is.. Buy more PLTR

  8. PAUL JEREMIAH Deleon
    PAUL JEREMIAH Deleon
    16 dagen geleden

    @Economics Explained. You're explanations are not quite correct and missing the point because you're not taking into account Institutional investors Calculus and contemporary corporate strategic thinking... the value of a business is the sum of the present value of all future cashflows... growth at all cost strategy sacrifices profits now and in the near future, in order to accelerate firm growth up to a point where they reach enormous economies of scale and near captive markets and then switch on to phase two which is to steadily increase profits to sizable amounts.. so in effect the valuation models imply that the PV of Long Term Future Cashflow will offset all losses in the near term... This is the implicit assumption in the valuation... alternatively, if a current investor cant themselves wait for phase two, the current investor can sell her stakes at the same valuation or more, raking in the profits now, and at the same time transferring the risks of executing phase two ( value capture) to the next investor... but the calculus is still the same... but to be executes by someome else...

  9. David Orland Brown
    David Orland Brown
    19 dagen geleden

    Great video 👍🏽

  10. Isse Mexfincano
    Isse Mexfincano
    21 dag geleden

    Most hyped up millennials still believe Tesla is profitable... Hilarious...

  11. Edwon Rodrigues
    Edwon Rodrigues
    22 dagen geleden

    The cowardly stage byerly whisper because fighter distinctly instruct circa a unwieldy stock. flawless, successful night

  12. Prem Kumar
    Prem Kumar
    23 dagen geleden

    This video hasn't given any solution to "mortal" investor. Not even the simple advice as "don't invest in these companies". So what the point of telling us about these.

  13. Monkey Tron
    Monkey Tron
    23 dagen geleden

    What’s wrong with not making a profit? By just breaking even you can pay yourself and your employees a wage they can live on. That’s valuable in itself surely.

  14. Max N
    Max N
    23 dagen geleden

    so operate a company at break even or low profit.

  15. daswiftmova
    daswiftmova
    23 dagen geleden

    why are regular businesses not allowed to take losses for too long but these super big companies can?

  16. Anime Banz
    Anime Banz
    24 dagen geleden

    In my country the regulator won't even allow your company to be listed if you haven't turned in a profit 3 years in a row. The recent events with respect to GME show that the American regulator is worse than useless when it comes to protecting the interests of the small retail investor.

  17. Low Effort Robotics
    Low Effort Robotics
    25 dagen geleden

    Isn't that a free market equivalent of subsidies?

  18. Pat Coleman
    Pat Coleman
    26 dagen geleden

    There is one, we call it taxes.

  19. Thomas Lester
    Thomas Lester
    26 dagen geleden

    "A product that is only used because it is heavily compensated probably shouldn't exist" Meat and dairy industry looking worried...

  20. Brian
    Brian
    26 dagen geleden

    The definition of fascism.

  21. Michael Heider
    Michael Heider
    27 dagen geleden

    Nikola- the perfect crime

  22. automotive
    automotive
    28 dagen geleden

    Tesla fits this category. Musk isn't the richest man right now because his businesses are profitable

  23. Aathira pillai
    Aathira pillai
    28 dagen geleden

    The brutal part is these gatsby's come together and invest in flawed companies and the genuine competitor has to pay a huge price to stay afloat ..the struggle is real. they have to let go of the best engineer so the business can survive.

  24. Peter S.
    Peter S.
    28 dagen geleden

    Taxes

  25. Chris Gadsby
    Chris Gadsby
    29 dagen geleden

    Weren't many of these companies proudly described as "disruptive" - surely there's a clue there? The real question is the purpose of their disruption, any suggestions?

  26. John Manno
    John Manno
    29 dagen geleden

    It's a bit ironic that this video is on NLlike

  27. Richard Caldwell
    Richard Caldwell
    Maand geleden

    Your lack of objectivity is showing. Most of the deadweight loss at Uber is borne by the DRIVERS.

  28. Erik Weimer
    Erik Weimer
    Maand geleden

    I would say this modern business model is one of the problems with today's society. This, along with the staggering greed of CEOs and their "compensation packages" is creating a very bleak world.

  29. Qerd Zamen
    Qerd Zamen
    Maand geleden

    So how to protect against this. Hiw to weed them out

  30. Rob o
    Rob o
    Maand geleden

    I think they could have made a more creative name then Nikola .

  31. The Traveler
    The Traveler
    Maand geleden

    Basically. A business starting is in the red. (The big boys, the grifters don't want it yet) A small business works its self up (out of dept). Until on day, it will turn a profit. After a business is now turning a profit, then the vultures come circling. The drifters come for a cash cow.. They mop it up. For socialism, dividend up the means of production.

  32. Hadi Basma
    Hadi Basma
    Maand geleden

    Best example: Lebanon

  33. Don Darreb
    Don Darreb
    Maand geleden

    the main reason for "un profitability" which is normal for most of the big companies is the current form of the corporate tax, and the type of official reporting it entails. For shareholders and managers alike it is more profitable to have shares rising in price (the sky is the limit) than to have the same money given as dividends (and taxed on multiple levels a number of times). The same applies to acquisitions, mergers etc. Unlike direct investments they are not taxed and therefore are much more financially attractive than direct financing (partnerships) schemes. For the companies depending on state (fixed profitability) contracts the opposite situation is true. They split and cut their production chains to rise "partnerships" with accompanying "profitability" limits(usually 8-11% of costs) (see 1+.08)^n formula for allowed profit. You want this n to be as big as possible). The ponzy scheme (build a power-point presentation, attract venture, sell repeat) while is quite real in American business is true only for few million IPO rounds and minor companies.. mostly..The cases like Nicola are an exception and happen only because they got financial backing by big companies because of not commercial purposes (Nicola was used as a "we do something against Tesla dominance in EV market" banner etc. There are similar cases in farma industry, SAP programming etc.).

  34. Gustavo Albericchi Du Rocher
    Gustavo Albericchi Du Rocher
    Maand geleden

    stable form of madness. nice concept name. i kind of agree, because as the pyramid that it is, it can fall at any time. in a survivorship bias-style of thinking, we end up only noticing those that became big - that survived - but many had died in their teens and carried away the investor's money. so what we can say is... Queóps, Quefren and Miquerinos style of pyramids are a stable form of madness. hahahha

  35. Gustavo Albericchi Du Rocher
    Gustavo Albericchi Du Rocher
    Maand geleden

    i've imagined you would talk about Uber... see Uber as something as the guy that gathered money for this drug research: another long plan idea. their goal is to have the monopoly in the world! thought it's very hard, they are expending a lot on it... Edit: Uber for an example, if you are right, how long you would say that it can go? if i am right, it can become a market leader in most countries in the world with a very efficient software and servers with way lower costs than they are costing right now... and again, even if they only keep battling for the leadership at almost every market in the world, how long that it can go as this pyramid??? even if it was, i don't believe they would be a pyramid anymore but most importantly: they earn a great chunk of what the driver's earn.

  36. Gustavo Albericchi Du Rocher
    Gustavo Albericchi Du Rocher
    Maand geleden

    before i watch the video, i'll comment what i think it is because i think i've totally had already thought about this hahahahha some companies are opening with insider investors planned for some phases of their evolution to inflate the prices per action (bond?) they have when they do their IPO and after the IPO some other waves of investments happen only to make it inflate again, this besides "faked squeezes" (a lot of pre-hired "investors" invest at some point in the company to create a fake movement on the market) until a giant comes from somewhere and buys them? i've seen lots of ludicrous ideas reaching prices waaaayyy beyong their capacities or earnings. there are actually few that aren't. for me one that isn't, is Uber, despite a lot of people thinking it as an exponential of this practice, i think uber can be very profitable. they are just doing other thing that this investments can be for: monopoly. monopolies are very profitable. hahah now, let's check it out!

    1. Gustavo Albericchi Du Rocher
      Gustavo Albericchi Du Rocher
      Maand geleden

      and deadweight loss aswell - good to learn these two terms. edit: but "only" investors also means a lot of the average joes out there - but a good thing is that a lot of these companies can go with this on forever. Uber for an example, if you are right, how long you would say that it can go? if i am right, he can become a market leader in most countries in the world with a very efficient software and servers with way lower costs than they have right now. but companies like brazilian ifood (usa would be rappi, i guess?) gives everyday coupons to thousand's of people and they simply don't have all that money to spare... soon, the investment will cease, actions (stocks) will go all the way down and the founders will very likely be rich and bankrupt at the same time... but those that had money on it, will lose it; and the money put on all those investment rounds and stocks to be able to give costumers coupons in an ever rising competitive market will only be misallocated resources, that if invested in other areas would be both profitable and important to supply the demand for those, but as they are not, they end up creating a deadweight loss.

    2. Gustavo Albericchi Du Rocher
      Gustavo Albericchi Du Rocher
      Maand geleden

      10:27 yes! misallocated resources is what i've meant in a part of above! hahahha

  37. phil durre
    phil durre
    Maand geleden

    The US dollar, the euro? those are ponzy shemes, fortunately we get the printer right...

  38. OneEyeWinky
    OneEyeWinky
    Maand geleden

    Just curious how many of these green companies are ponzi schemes

  39. Kartoffel
    Kartoffel
    Maand geleden

    These IPOs are the new ponzi schemes.

  40. Alex xelA
    Alex xelA
    Maand geleden

    Because drug money and laundering.

  41. Mark Jansen
    Mark Jansen
    Maand geleden

    Very interesting. One question keeps going through my mind: according to what criteria would you want to put rules in place to filter out the bad guys from the good guys (without those rules being detrimental to the economy as a whole)? Stated otherwise: I tend to think that most people will agree this situation is not desirable, but how to fix it?

  42. robert wiederhold
    robert wiederhold
    Maand geleden

    Just like the Zombie SEC

  43. J S
    J S
    Maand geleden

    Why is Amazon in business for so many years and never made any profits until maybe now? How do you run a business like that. A mom and pop store would fold right away.

  44. Chen Lin Qian
    Chen Lin Qian
    Maand geleden

    Let's call it for what it is. Ponzi.

  45. Renacimiento Argentino
    Renacimiento Argentino
    Maand geleden

    You don't need to make profits when the Federal Reserves gives trillion on dollars to pump stocks

  46. James Santiagovsky
    James Santiagovsky
    Maand geleden

    hahaha! nice video.

  47. Darris Hawks
    Darris Hawks
    Maand geleden

    The tendency of the rate of profit to decline? Lol

  48. Michael Gray
    Michael Gray
    Maand geleden

    Wnba

  49. yc cy
    yc cy
    Maand geleden

    开心就好!

  50. Ol' Smokey
    Ol' Smokey
    Maand geleden

    Flip a coin, socialism or hyperinflation. All I know is you better learn how to grow some drugs lol

  51. Joe Jonas
    Joe Jonas
    Maand geleden

    How dare you say that my ev company that might start production on its first vehicle assuming everything goes to plan and there are absolutely no hiccups in building up distribution and a supply chain from scratch in 3rd quarter 2024 isn’t worth $40billion today. Why this is outrageous!!!! Can’t you see that it’s going to be in the automobile industry that notoriously profitable and high margin business that has thousands of successful companies..... oh wait.

  52. Chris Floyd
    Chris Floyd
    Maand geleden

    So, an economy based on hype is unstable and dangerous... huh

  53. Gourds
    Gourds
    Maand geleden

    11:39 That reference is old. And I recognized that reference. Therefore, I am …knowledgeable of old references!

  54. K D
    K D
    Maand geleden

    We are all just really Hampsters

    1. K D
      K D
      Maand geleden

      We are just all really hampsters locked in cage running on a giant tread mill........that’s all it is.....

  55. Ava Yu
    Ava Yu
    Maand geleden

    Again, glorified pyramid, Ponzi schemes are really the basis of all investment fund rounds! e.g.: WeWork...NOT!🤓

  56. David Stebbins
    David Stebbins
    Maand geleden

    Something something gamestop

  57. Saeed Hossain
    Saeed Hossain
    Maand geleden

    yeap, it's zombie time

  58. tnix88
    tnix88
    Maand geleden

    Uber is the perfect example, Uber eats is their only profit still. It's the easiest job ever BTW

  59. Sourish Saha
    Sourish Saha
    2 maanden geleden

    as long as there's easy money at near zero interest and these idiots can get ton of money coupled with options,The bubble will keep inflating and govt will try to print money to hide it., The higher the fly the harder the fall

  60. ChipHazard
    ChipHazard
    2 maanden geleden

    in short: massive global bubble

  61. Kaustav Bose
    Kaustav Bose
    2 maanden geleden

    Absolutely amazing explanation of what is happening in a world with endless money printing

  62. sanjay mourya
    sanjay mourya
    2 maanden geleden

    Now companies run on deficit finance model, thanks to Pvt bank ability to print money (online)...

  63. Dag A.
    Dag A.
    2 maanden geleden

    Bitcoin!

  64. Ronald Rice
    Ronald Rice
    2 maanden geleden

    The swanky taiwan effectively label because sister-in-law microcephaly hop at a maddening cone. bored, trite delete

  65. Chris Namaste
    Chris Namaste
    2 maanden geleden

    That opening analogy is so flawed....

  66. Mujtahid Haque
    Mujtahid Haque
    2 maanden geleden

    Uber would be profitable right now and also the drivers would be a lot happier if they didn't drastically cut their prices a couple years ago. Nobody talks about this aspect of their business. The executives thought this would make the company grow but it actually didn't because they're basically a monopoly anyway.

  67. Maxim Matkovsky
    Maxim Matkovsky
    2 maanden geleden

    Absolutely amazing. Thank you for the video

  68. HBS Despatch
    HBS Despatch
    2 maanden geleden

    I think the video didnt touch the most powerful structures that makes our economy , and even how those zombies companies exist: Its known as "FLOAT" With that alone, there is a loopholes that is too good to not being used. But we couldn't help it, as it become bloated and too big as for the economic sector around the participatory market, the structures rendering itself as "TooBigTooFail" in our times. Eradicating the system can only meant market makers are gone, and global market totally halted, and public confidence to see such things to ever ressurect, to encourage big business to exist, might be gone for long time. We might discover even powerful and balanced form of participatory market system that would be the construct of our economy in the future, but for now, this is perhaps the best we can ever deviced. It bring us all to our favorite cars, gadgets, machinery and industry that running the society.... In all of its imperfection, its a perfect way to sell incentives, which is a motivator to those that willing to play and chase it...

  69. Truth Teller.
    Truth Teller.
    2 maanden geleden

    The thing is guys - the western economies no longer build wealth, they simply transfer wealth from bottom up! Overtime, Asians and Africans will come out of this century financially better than westerners.

    1. Mucci Sebastián
      Mucci Sebastián
      2 maanden geleden

      there is a NWO trying to make a slave class and a rich class, no matter where you live

  70. Michael None
    Michael None
    2 maanden geleden

    So, I thought that for any campany- in order to be a part of the snp it must show profits for a few quarters..

  71. Andriy Troyan
    Andriy Troyan
    2 maanden geleden

    I like those zombies company. Seems like rich people funding a great service for us (like in case of Uber)

  72. Vishal Pawar
    Vishal Pawar
    2 maanden geleden

    ❤️

  73. Ethan biscuit
    Ethan biscuit
    2 maanden geleden

    this is state capitalism correct? where big business fuses with the government apparatus to create a structure whereby government officials aim to provide the social and legal framework within which giant corporations can operate most effectively.

    1. Mucci Sebastián
      Mucci Sebastián
      2 maanden geleden

      governments are only there to lie to people, hardly helping anyone

  74. KvB TV
    KvB TV
    2 maanden geleden

    Wrong. Most businesses do not exist to make money. Most businesses exist to provide value. Huge difference.

  75. Jonathan Thomson
    Jonathan Thomson
    2 maanden geleden

    THIS IS PROPAGANDA. the real ponzi scheme is the commonwealth housing market!

  76. Acesiz Official
    Acesiz Official
    2 maanden geleden

    Interesting

  77. Khi Turner
    Khi Turner
    2 maanden geleden

    _I learn more in this than in University_

  78. MrWashesp
    MrWashesp
    2 maanden geleden

    You know the Nikola hype was entirely to get the GM backing.

  79. The Rad Fems
    The Rad Fems
    2 maanden geleden

    Predatory pricing on the most grandiose scale.

  80. Ferdinand
    Ferdinand
    2 maanden geleden

    0:21 why would a freezer make ice? Did you want an icemaker? Because my freezer freezes my meat and pizza's.

  81. Abraham
    Abraham
    2 maanden geleden

    So an Another dot com bubble

  82. Henk Smit
    Henk Smit
    2 maanden geleden

    Ultimately, it is again the small investor (as the pension investor) who makes a very small group super rich ...... a pyramid game with a small group who laughs themselves to death

  83. Thalles Mello
    Thalles Mello
    2 maanden geleden

    A era do Capital Improdutivo

  84. rodrigo izaguirre
    rodrigo izaguirre
    2 maanden geleden

    That subtle NPAT of 69.420 at the start

  85. Xiao Hei. we are all equal
    Xiao Hei. we are all equal
    2 maanden geleden

    Looks quite similar to a lot of crypto currency startups that pull in investors on pure hype while never delivering on real-world adoption.

  86. Shricharan Baskaran
    Shricharan Baskaran
    2 maanden geleden

    Shouldn't these unprofitable companies kicked out of S&P 500? This could potentially cause huge losses for the public investing heavily on S&P 500 if the bubble bursts.

  87. Andrew Jehan
    Andrew Jehan
    2 maanden geleden

    Can't "no profits" sometimes simply be a case of reinvestment of revenue back into expanding the company's holdings? And, wouldn't that count as a legitimate reason for the company's stock price going up? And finally, could this tactic be used as a way to avoid paying corporate taxes on profits?

    1. Seeking The light
      Seeking The light
      2 maanden geleden

      Sometimes Amazon buy real estate like nuts and they still say they are not in profit😂😂😂 which means they are expanding, covering the expenses for the future where they gain profit at a large scale like even if amazon can get 2% profit from the total they earn that's too huge of a sum😀

  88. E Saunders
    E Saunders
    2 maanden geleden

    We're in a massive financial bubble and nobody has seen it - GoFundMe and their like are essentially just a tool to allow anyone to do an IPO for their shitty little sandwich bar. Lots of these people essentially run Ponzi schemes by paying out funders from their last project with revenue from their next one - skimming more capital each time. When they finally get too big they just fail it and cash out.

    1. Mucci Sebastián
      Mucci Sebastián
      2 maanden geleden

      totally, i feel one of the reasons of this virus created in a lab is for hiding the collapse of a big part of capitalism, and of course benefit the sionist banking interests

  89. David Lucas
    David Lucas
    2 maanden geleden

    Found quite funny his accent.

  90. Yifan Tian
    Yifan Tian
    2 maanden geleden

    I come here after GME frenzy.

  91. John BEE
    John BEE
    2 maanden geleden

    This is a very interesting video. And it needs to be taken in to context and perspective. Share price and market attention is based on a company's potential to achieve XYZ results in ABC time. Company's that continually demonstrate potential for a positive result will always garner the market attention - for some, like Uber, it may take decades. Or not.

  92. Arrow Dog
    Arrow Dog
    2 maanden geleden

    Essentially, there are hundreds of 'Enron' collapses lurking in the shadows... we are teetering on catastrophe.

  93. Gavin Li
    Gavin Li
    2 maanden geleden

    We’ll see what happens when the market remains flat or we enter a bear market for a few years or when interest rates rise.

  94. Benjamin Hudson
    Benjamin Hudson
    2 maanden geleden

    Worst part is that a very good portion of money invested in the sharemarket is not invested by a 'shareholder', but by superannuation companies on behalf of individuals. The fact the essentially 9.5% of all money earned in Australia is 'invested' feeds this scheme and provides the fertile grounds for this to occur.

  95. Ben Grogan
    Ben Grogan
    2 maanden geleden

    They keep people employed at least and to serve a small purpose now whether or not they should exist I don't really know.

  96. lee macdonald
    lee macdonald
    2 maanden geleden

    Zombie companies

  97. darkMuffin31
    darkMuffin31
    2 maanden geleden

    What people don't seem to understand is that when an airline wastes 2 billion theres little IP value added, it's a clear loss. When Uber spends 2 billion, their employees learn, become more efficient and generate new lines of profitable business and skills that can be pivoted to other markets. Uber spends money to generate IP which is potentially worth a lot more to long term investors than what they're losing short term.

  98. flamingopie
    flamingopie
    2 maanden geleden

    So hang on, aren't these zombie companies at least hypothetically gaining value due to reinvestment of gross profits? Or did I zone out and we're talking about negative gross revenue?

    1. Bill Bopperton
      Bill Bopperton
      2 maanden geleden

      Negative gross revenue? Huh

  99. humberto rangel cabrera
    humberto rangel cabrera
    2 maanden geleden

    Printing money goes brrrr 😂

  100. E.S Anoop
    E.S Anoop
    2 maanden geleden

    Beware of the heights. It hurts when you fall from the top😎😎😎