The General Economics Thread

Easy, a new development gets built with 300 houses, you buy 200 of them to limit the supply and drive up prices. You then sell them in small numbers over several years so that the prices stay high.

You don’t even need to buy houses to do it, it’s a perfectly viable tactic to do with land that’s suitable for development.

Edited by Silasw on Feb 8th 2024 at 11:30:57 AM

Why not?

Edited by Noaqiyeum on Feb 8th 2024 at 11:32:59 AM

A scalper adds no value to the thing they resell. They're simply engaging in a form of arbitrage: taking a scarce product and marking it up to the maximum amount people are willing to pay for it.

House flippers do (usually) add value by putting their own labor and capital into repairing and renovating homes, something the current/past owner may not be able to do. Plus, while housing is a scarce product, it's hard to say that flippers are able to artificially restrict the supply. They have to compete in the marketplace.

What they bring to the market is the ability to very rapidly close with a seller who needs to get rid of their property. When my wife and I were trying to sell our old house, the one that we were underwater on since 2006 but didn't live in any more, we had no resources to update it, not even to repaint or replace the carpets. It could have taken a long time to sell at our asking price.

So we sold it to a flipper. Any remorse we might have felt for supporting this practice was drowned out by the relief of finally getting rid of the damned thing. We found out later that they made the interior look brand spanking new and turned it around for $100K more than we sold it for. That's a value-add, and is thus not "scalping".

Now, buying up 200 homes in a new development and dribbling them out onto the market - that's not flipping. It's straight scalping.

Edited by Fighteer on Feb 8th 2024 at 6:42:57 AM

Yeah a flipper isn’t a scalper, the whole process of flipping involves change and is also generally a quick thing and done with one to a handful of properties.

Property investment groups generally do things like buy up a bunch of houses (sometimes one by one) and either trickle them out onto the market or immediately put them up as rentals in an area that has a shortage of housing for people to own.

i just stated watching marktilbury and graham Stepen videos. honestly really good stuff.

Edited by vjoi on Feb 24th 2024 at 6:16:23 AM

There is a lot of purchasing and reselling houses without making any substantive change going on in Canada - and it does contribute to driving up prices, because the amount of speculative buying increases demand and creates bidding wars with people who just want a place to live in.

The UK’s largest bakery chain Greggs has reported a 27% increase in profits to £188m, a new record that comes alongside them overtaking Mc Donalds as the UK’s favourite breakfast spot. As such they’ve declared that they do not plan to do any more price increases and as standard will be sharing 10% of the profits (£17.6m) across the staff. [1]

Nice to see somewhere treating staff well doing well.

Well, they better reward their employees for this-oh, that's good.

According to the More Perfect Union Twitter, Lyft and Uber are ceasing operations in Minneapolis due to the city passing a minimum wage law for ride share drivers:

https://x.com/moreperfectus/status/1768660777337028741?s=46&t=7YT7yMPCw2VMMwQUxWj5_A

Edited by BigBadShadow25 on Mar 15th 2024 at 4:14:54 AM

Doesn't surprise me. Gig economy companies tend to be toxic as fuck and will do literally anything to avoid having to pay a good wage because their design doesn't actually make it possible to make their owners disgustingly wealthy while simultaneously paying the workers enough to live.

Which, IMO, is a sign of a failed business model. If you cannot make enough of a profit while paying your employees enough to live, your company is garbage or all your focus is in the wrong place.

Edited by Zendervai on Mar 15th 2024 at 5:05:29 AM

A company would rather shut down than pay fairly.

You jest but I wouldn't be surprised if that were the case.

It may just be an attempt to threaten the city, Uber still operates in the U.K., where drivers have gotten minimum wage, paid meal breaks and paid holiday for 8 years.[1]

Edited by Silasw on Mar 15th 2024 at 11:34:09 AM

The impression I get is that when the market is big enough, Uber just sucks it up. But if they perceive it as not being necessary to them, they're willing to pull out.

This sort of thing is why Mcdonalds picking a fight with the Danish unions and losing miserably didn't result in Mcdonalds abandoning the country. They wanted the market too much and gave in.

Uber's core economic model is an extension of the gig economy, when "employees" are treated like independent contractors and paid the minimum that they are willing to work for. This is how it was able to undercut taxi service in cities. If it has to pay its drivers living wages for time worked, it loses a large part of that competitive edge.

That's the common wisdom, but honestly, rideshare apps also just provide a superior service. I travel for a living, and using taxis to get around sucked. I would pay extra to use a rideshare app over a regular taxi, and I'm certainly not alone there.

Anything that can be organised without actually having to talk to someone is great in my book. I'd rather pay for that than have to phone somewhere.

Well, yeah, Uber and Lyft did a lot of innovation in how you interact with their services, but it was only a matter of time until taxi companies caught up.

And now they’ve even lost a lot of their pricing edge in places.

Like, want to know how taxis in Minneapolis and St. Paul work? You use an app (based on which service) and they all have fixed prices. If you know you’re going from the airport to your house, you can find out the total price ahead of time. No surge pricing, no fluctuations based on availability, it’s just a fully fixed price. It’s also the same price across all the taxi services because it’s municipally set. And Uber and Lyft can’t really manage to fully undercut the taxis in that area because their algorithm frequently bumps the price higher and, of course, if you pre-book an Uber or a Lyft, it’s usually more expensive and it ends up being more expensive than pre-booking a taxi.

So the result is that it’s way easier to budget around a taxi ride in St. Paul, if you prebook a taxi will be there, and there’s way more oversight, so a taxi driver won’t accidentally steal your cat and dump it in a random place and refuse to admit the cat even existed. (Real thing that happened with Uber. IIRC, the cat was found. Uber was absolute garbage the whole time because they were like “we don’t have oversight or any real control and they’re just contractors and we aren’t liable in any way”. A taxi company is liable, so they’ll actually properly screen their potential employees.)

Any taxi service that managed to stick it out through Uber and Lyft deliberately underpricing their competition is now actually genuinely competitive again and the fixed pricing can be a real advantage in a lot of places and at a lot of times. Uber and Lyft both doing crazy surge pricing? Just order a taxi. You might need to wait a bit longer, but it’ll be noticeably cheaper. The problem is the places where they did manage to crash all the taxi services.

Edited by Zendervai on Mar 15th 2024 at 1:47:45 PM

Isn't the whole premise of Uber and Lyft that they use a loophole not to have to follow the rules for taxis, hence lowering costs? I find it ridiculous that techbros can pretend Loophole Abuse is 'innovation'

Sort of. They did significantly raise prices once they had enough of a foothold in order to actually try and make money and now the costs are pretty similar but way less of the money goes to the actual drivers.

It also depended on the country, in the UK Uber has always operates under the rules of Private Hire rather than any loophole, so they’ve been regulated not like black cabs (which you can flag down on the street) but like pre-bookable taxis that you use for a holiday or even how you’d hire a limo.

They did at one point get their Private Hire licence suspended for London due to refusing to cooperate with a police investigation, but they eventually backed down.

Having an app and fixed price fairs aren’t unique to Uber’s “it’s not a taxi, it’s a ride-share” grift model.

Edited by Silasw on Mar 16th 2024 at 9:08:46 AM

I would have thought that the actual innovation that the internet could provide for ridesharing is a system that could collate data on people requesting rides and see if there are multiple people wanting similar or connecting routes.

E.g., imagine points A, B, C, D in a line, and one person wants to go from A to C and another from B to D. The driver picks up the first one at point A, the second at B, drops the furst at C, the second at D. The system computes the fee for each based on their “share” of the ride, with a discount for sharing with another person. Combining rides in this way could allow for more efficient services, enabling lower prices for the buyer and more money earned per hour for the driver.

Edited by Galadriel on Mar 16th 2024 at 5:52:08 AM

Sounds like reinventing the concept of a bus route.

I would have thought that the actual innovation that the internet could provide for ridesharing is a system that could collate data on people requesting rides and see if there are multiple people wanting similar or connecting routes.

I don't know about Uber, but Lyft had exactly that option in The Before Times. It was confusing for the drivers and annoying for the riders.