Back in the day when I was in charge of all financial planning at Ford Credit, whenever a division would come up with an idea, they had to come up with a ‘steady state’ level of sales, or branches, and we would work with them to figure out how profitable the idea was, when it became profitable, and whether it hit or exceeded Ford’s return on equity criteria.
These days, when one looks at the losses of Uber, Lyft and We Work, one wonders if the financial houses backing these companies has ever done some basic financial planning for them.
None is profitable, or apparently expected to be profitable anytime soon.
We guess that it must be part of the ‘greater fool theory of investment: I might be a fool for investing in something, but there’s a greater fool out there that will buy my stake for a profit.
Maybe one of the underwriters of these stocks will send me a rejoinder about how and when they become profitable, and how much.