China’s Startup Bubble Runs Aground

Bike-share companies, among the hottest startups, are wiping out investors.

“It now appears bike sharing is the stupidest business, but the smartest brains of China all tried to get in,” Wu Shenghua, founder of 3Vbike, one of the many collapsed bike-sharing companies in China, told Reuters. “It really now seems ridiculous.”

Afterwards, a lot of the ingenious must-not-question stuff that happened during a bubble is considered “ridiculous.”

Bike-sharing companies are just an example. With their capital-intensive, cash-burning, ride-subsidizing business model, they were, in their short lifespan, among the hottest startups in China. They’ve attracted $2 billion in venture funding in 18 months of frenzy leading into 2017. Over 40 platforms mushroomed out of the ground.

This now collapsed bike-sharing craze was based on the idea that you could survive and thrive by lending out bikes below cost, and even for free, as long as you could make it up with volume.

Mobike and Ofo kicked off the frenzy and at one point carved up 95% of the market. Their bikes are everywhere in China, and they expanded into international markets.

Mobike was acquired for over $2 billion in April by Meituan Dianping, a money-losing food-delivery startup, partially owned by China’s internet giant Tencent. Meituan went public in September in Hong Kong, in a hugely ballyhooed IPO that raised $4.2 billion. Tencent subsequently reported a $1.3-billion gain from the IPO. The buying public was not so fortunate: Meituan’s shares have since plunged 37%. But given how much money it has raised in the IPO, it has enough cash to burn for a while, and it gets to live another day.

This may not be the case with Ofo. It too had a “valuation” of $2 billion. At its peak, it had operations in 20 countries, including the US. But like other bike-share companies before it, Ofo is now in the process of collapsing.

It has already shut down its operations in a number of countries, including the US.

In a recent letter to employees, CEO Dai Wei admitted that Ofo was struggling to deal with a cash shortage, in part because millions of frustrated users were demanding refunds and in part because suppliers were demanding to get paid. He said Ofo was battling on amid “pain and hopelessness.”

Among the problems:

  • Suppliers have been left unpaid.
  • A court in Beijing has placed CEO Dai on a credit blacklist.
  • Ofo has tried to sell its assets, which are mostly beaten-up bikes but gets very little for them — as little as $2 per bike.
  • Bikes are left behind broken, useless, and worthless.
  • Over 12 million users have asked online to be refunded their up-front deposits and passes. Others are clamoring for refunds at its offices in Beijing.

One of the people standing in line to get a refund was Jiang Zhe, a university student in Beijing, who told Reuters that he usually bought a month pass, but added, “I haven’t used Ofo recently because I can’t find any working bikes.”

The spooked transportation ministry said it had asked Ofo to optimize its refund procedure. It also urged the public to be more “tolerant” to allow domestic innovation to thrive.

“It would be tough for the company to get back to its golden days,” a former Ofo executive who asked not to be named told Reuters. “I think most people are really just waiting for the final days.”

The blow-up of the barely nascent industry started over a year ago

In June 2017, the first bike-share outfit toppled: Wukong Bike, which had been founded only six months earlier, took user deposits and VC funds with it. The company operated 1,200 bikes in the city of Chongqing. Initially, it charged users a tiny fee, later all rides were free. Most of the bikes disappeared because they didn’t have a GPS tracking device.

In November 2017, Bluegogo, China’s third largest bike-share outfit, collapsed. It had raised $90 million in venture capital, including $58 million in February 2017. It expanded internationally. In January 2017, it set up operations in San Francisco but shut them down in March 2017. By November 2017, it had burned through its cash, and no new investors were willing to throw more cash at it. That was the end.

Also in November 2017, Mingbike, which had raised $15 million from VC firms and with operations in major Chinese cities, collapsed and user deposits to evaporated.

And that was the beginning of the end of the craze.

After the collapse of number 3, Bluegogo, there was talk that the two leaders Mobike and Ofo would benefit and come out on top. Their strategy too was very low fees and “ride-for-free” periods, while at the same time having to fund an expensive, capital intensive business.

Without an endless flow of new cash, these cash-burn machines collapse. The idea that these startups can make it by lending out bikes below cost and often for free as long as they can make it up by expanding and growing the number of bikes is just a symptom of a larger craze – invented in Silicon Valley and imitated in China.

But the craze has run aground on the rocks of reality. The Wall Street Journal:

Chinese startups received record sums of money in the first half, including the $14 billion funding round for Ant Financial, Alibaba’s finance affiliate. But investments started to slow in the third quarter, while venture capitalists, especially smaller ones, are finding it harder to raise money amid Beijing’s crackdown on debt. Venture-capital funds raised 56% less money in the first three quarters of 2018 compared with the same period of 2017, according to data provider Zero2IPO.

With the Chinese economy slowing in recent months, investors will likely get more cautious about where to put their money. When times are good, investors are willing to fund fast-growing, unprofitable startups. When the boom fades, companies without a sustainable business model will take a hit. Tech giants Alibaba and Tencent, which have sunk billions into startups in the past few years and could face write-downs, could become collateral damage.

Tencent is already infamous for its well-timed forays into the US tech scene, including its purchase in November 17 of 146 million shares of Snap, after Snap had plunged. On the day the purchase was announced (no purchase price was named), Snap traded at around $13 a share. Today, shares closed at $5.35. If Tencent paid $13 a share and still owns them, it has lost over $1.1 billion on this deal. And Tencent’s own shares, whose ADRs trade in the US, have plunged 35% from their peak in January.

China’s auto industry panics, overcapacity spreads, but government brushes off the wailing and gnashing of teeth, and looks to EVs. Read… China Auto Sales Plunge, Face First Annual Decline in 30 Years

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  77 comments for “China’s Startup Bubble Runs Aground

  1. 2banana
    Dec 27, 2018 at 9:51 pm

    Don’t feel bad smart people of China with money. Just Google the saga of Pets.com…

    *****

    “but the smartest brains of China all tried to get in,” Wu Shenghua, founder of 3Vbike, one of the many collapsed bike-sharing companies in China, told Reuters. “It really now seems ridiculous.”

    • Javert Chip
      Dec 28, 2018 at 9:00 pm

      People with money, a dream, and zero money management experience are a wonder to behold.

      As a (now retired) CFO, I didn’t get mixed up with the dot.com “let Joe-Public do venture capital” craze, but in any era, exhurbrant times bypass normal reality checks.

      When absolutely forced to fund pure crap, I’d give managers a maximum of 3 years to play. If things went that far with no results, I wanted them fired (I won the vast majority of those discussions).

      A normal company is in the business of ethically making money for shareholders, not playing venture capital. R&D is a house-broken blend of the 2 business models: if you happen to be a “regulated monopoly” (AT&T of old), you could afford to fund the best research in the world (Bell labs).

  2. roddy6667
    Dec 27, 2018 at 10:35 pm

    Living in China, I saw the rental bike mania come and go. First of all, bicycles were almost extinct. A few young people rode bikes and a handful of old people were still using some that looked they were from the Cultural Revolution era. One day I noticed that almost everybody that was riding a bike was not on a rental bike. Young men were riding mountain bikes or expensive models, and the old men had their rusty 30 year old relics. It was rare to see anybody on an OFO or Mobike. There were thousands of them clogging the sidewalks near bus and subway stations. A year later, I watched as truckloads of them were headed out of town. There was never a demand. Everybody on two wheels is on an electric scooter or bicycle. Nobody wants to pedal.

    • MC01
      Dec 28, 2018 at 8:28 am

      Ah yes, the Feige (Flying Pigeon), the true Maoist bicycle. I have no idea how many were made; production must have run into the hundreds of million. I am not an expert in bicycle, but ladies’ model look a whole lot like a straight copy of the classic Omafiets, the “standard” Dutch ladies’ bicycle everybody from Italy to Taiwan copied.
      And to prove in what kind of crazy bubble we live in, here is how much a seller based in Phoenix is asking for one: https://www.1stdibs.com/furniture/more-furniture-collectibles/collectibles-curiosities/sports-equipment-memorabilia/vintage-chinese-bicycle-flying-pigeon/id-f_10294403/

      • MB732
        Dec 28, 2018 at 9:40 am

        I just bought it. Even with white walls, rustproofing and top of the line aftermarket bell it came in under my Bicycle Budget of $120/mo.

        • MC01
          Dec 29, 2018 at 7:42 am

          Starting at €400 in Europe. Simon Leys has once again been proved completely right.

      • James Mitchell
        Dec 28, 2018 at 10:11 am

        Ironic business story: Forty years ago I was a small bike shop retailer of Flying Pigeon bicycles in California. I was promised a trip to Shanghai. I was informed that I was popular at the factory. Unfortunately, Sears bought a container of Flying Pigeon bikes, demanded exclusive right to sell and I lost out. I have filed this experience under “Be careful what you wish for. “

      • nick kelly
        Dec 28, 2018 at 11:42 am

        At the height of the Castro madness (Socialism or Death) even farmers’ markets were illegal. Then the collapse of the Soviet Union ended almost free oil. There was none even for buses, so the regime imported the Chinese bike.

        • Javert Chip
          Dec 28, 2018 at 9:13 pm

          Cuba is currently in the process of “belt tightening” because their current totalitarian socialist benefactor (Venezuela) is going belly-up.

          I visited Havana & the tobacco growing areas last summer. Seeing 1950’s cars is a thrill that quickly wears as you become aware of the stunning reality of everyday socialist existence (vast majority of old American cars are taxis for tourists…with Chinese/Japanese engines).

  3. Xypher2000
    Dec 27, 2018 at 11:04 pm

    If they charged for damages to a bike with the last rider, that sh*t would stop.

    • Dec 28, 2018 at 12:16 am

      If they charge for anything, no one rides these things. They’ve got to be nearly free to become popular.

      • Mch
        Dec 28, 2018 at 5:39 pm

        I wonder how much damage there was down the supply chain. After all, it’s a bike manufacturers couldn’t have been that stupid. They must’ve demand it something upfront.

        • MC01
          Dec 29, 2018 at 4:15 am

          Ofo has a pending RMB70 million lawsuit from a bicycle manufacturer and earlier this year had to pay RMB21 million to a lock manufacturer between unpaid bills, legal expenses and assorted penalties. Alibaba, an Ofo investor, provided the funds but the company is terminally short on cash, especially since worried Chinese customers are claiming back their deposits in droves.

          Many of the bicycles these Asian startups use are manufactured by Feige (Flying Pigeon), China’s oldest and largest bicycle manufacturer, which is State-owned so no big problem here. But over the past few years many smaller manufacturers have popped up in Mainland China precisely to service these bike-sharing startups.
          Most of these manufacturers were set up by wide-eyed hopefuls who truly believed the PR spin (backed by the Chinese government) of a healthy demand for 10 million bikes per year in replacements alone: these people will be taken to the cleaners because there’s no bailout coming for them.

      • Marty
        Dec 31, 2018 at 1:36 pm

        Not true! In London, I happily paid 90 pounds a year for a fob to rent a Ken Livingtone bike, twice a day, for 5 years. There could be 30 bikes in the ‘stop ahead box’ (where the bike lane expands to cover the entire lane at a stop signal so the cyclists won’t be squished by cars racing up to the next stop light). There was a 30 min time limit on a rental period to avoid an additional charge.

        • Marty
          Dec 31, 2018 at 1:56 pm

          Forgot to mention, these are docked bikes. And the city subsidized them by moving them around to ‘fix’ the bike in, bike out daily movement. Less than half of Londoners have a car.

  4. Rosebud
    Dec 27, 2018 at 11:06 pm

    I actually like the concept very much, but humans gotta evolve… not the current crop.

    • Javert Chip
      Dec 28, 2018 at 9:15 pm

      Rosebud

      Please have your money contact me…I have a dream…

  5. Dec 27, 2018 at 11:18 pm

    “Tencent is already infamous for its well-timed forays into the US tech scene, ”

    Surely that should be ill-timed…

    • Dec 28, 2018 at 12:14 am

      Maybe my dripping sarcasm wasn’t dripping enough? I do get a little dry with my humor sometimes :-]

  6. nick kelly
    Dec 27, 2018 at 11:18 pm

    Didn’t Wolfgang Schauble express interest in buying used bicycles?

    • Dec 28, 2018 at 12:05 am

      Excellent memory, amazing, actually, but off just a nuance…

      As I reported here back in the day, after the ECB began to do “whatever it takes” to keep the debt-sinner countries in the Eurozone, German politician Frank Schäffler said elegantly and just about correctly in July 2012 that the ECB would soon buy even “old bicycles.”

      So maybe Ofo should contact the ECB

      ;-]

  7. Satya Mardelli
    Dec 28, 2018 at 12:00 am

    The next big Chinese ripoff is peer-to-peer (P2P) lending. These fly-by-night outfits are failing left and right. So where do you think these shadow bankers might get there next “round” of funding? If you guessed the U.S. IPO market you’d be right.

    So naive Americans are expected to buy into these hot IPOs. Those that do will see their investment vaporize in about 9-12 months.

  8. Clay Dennis
    Dec 28, 2018 at 12:02 am

    Do the American Escooter rental companies like Bird and Lime have the same flawed business model? Will they suffer the same fate in the near future ?

    • Dec 28, 2018 at 12:11 am

      I think their business model is even more flawed. Those scooters are more expensive than bikes, and in public use like this, they last only a few months. Companies charge $1 or $2 for a ride, with the company having to pick up and charge the scooters wherever they’ve been dropped off. The people who funded this don’t know how to use a calculator.

      It goes by the old Silicon Valley rule: Sell dollar bills for 90 cents, spend 3 dollars per dollar-bill-sold on advertising, and spend 1 dollar per dollar-bill-sold on handling the transaction and clean up the mess.

      • RepubAnon
        Dec 28, 2018 at 10:20 am

        The Silly Valley model of offering goods and services at below break-even pricing to achieve market share dominance (and then jacking up the price) only works if there are substantial barriers to entry into that particular business. Example: if everyone standardizes on your particular hardware, and it costs several billion to start manufacturing a competing item, the strategy can work.

        However, the model only works if it’s expensive to switch. For ride sharing, all it takes is a new app and a PR campaign to get new users. With bike / scooter sharing, people aren’t locked into a particular device… there’s no cost to switching. (Compare this to, say, switching between an Apple computer to a Windows computer, or to a Linux computer. Each time, you need to buy lots of new software, possibly new peripheral devices, etc. Another example: once everyone’s designed their motherboards around, say, an Intel chip – it can be very expensive to change to a different manufacturer.)

        All in all, people forget the lessons of the Dot Com bubble, where putting “dot.com” in your company name generated hordes of investors eager to cash in on what they thought would be the next Microsoft. Most lost everything.

        Now, had these bicycle/scooter sharing companies thought to put “blockchain” in their name, success would have been assured (/snark)

        • Javert Chip
          Dec 28, 2018 at 9:23 pm

          People didn’t forget the lessons of Dot.com; they never learned it.

          Now they use some variant of “BitCoin” or “crypto”.

          For a surprisingly large sub-set, the siren call of stupid is irresistible.

        • intosh
          Dec 29, 2018 at 2:52 am

          “However, the model only works if it’s expensive to switch. For ride sharing, all it takes is a new app and a PR campaign to get new users.”

          The cost of switching is not high for the users but the barrier of entry for competitor may be significantly high. The infrastructure and the network effect take time to build. Look at AirBnB and Uber. You might think it’s “only” an app and some PR; but where are the competitors in regions where Uber and AirBnB enjoy the first-mover advantage?

          The major problem with bike sharing is that it is not a novel idea at all; everyone had the same idea and before anyone could build a sustainable network of users (assuming there is even enough demand for such service), they find themselves racing to the bottom against several competitors.

        • char
          Dec 29, 2018 at 12:54 pm

          AirBnB competitors are more regional, which is not really a problem for this market. Besides most rooms AirBnB rents out are not the extra room rarely rented out but more standard business.

      • MCH
        Dec 28, 2018 at 6:30 pm

        I love it, here you go, my five for your two tens. What amazes me is just how often people fall for this, and how history just keeps on repeating itself.

      • alex in san jose AKA digital Detroit
        Dec 29, 2018 at 5:22 pm

        They’re paying people to go out and collect the scooters and charge them, $5-$7 per charge, sometimes a bit more. It’s going by the old Silicon Valley rule all right.

  9. Eric
    Dec 28, 2018 at 12:45 am

    So, here in the bike Mecca that is Boulder, CO, Ofo was one of a small handful of companies that the city recently gave licenses to for their bike sharing operations. It lasted all of 2 months for Ofo. The 100 bikes they had here were donated to the local charity I volunteer with – communitycycles.org – and will be given to low income people in our community, as well as individuals that go through the earn a bike program. Of course, before CC could start giving out the bikes, Ofo wanted the eletronic pay/lock mechanisms removed from the bikes and returned. Easy-peasy. They lost, we won.

  10. HMG
    Dec 28, 2018 at 3:06 am

    Wolf

    Are you getting a bit hot under the collar ?

    Are you breaking your owns rules?

    Did you not ask that no-one should monopolise the comments ?

    Why has this post touched a nerve ?

    PS Are there any of these bike Companies operating in Amsterdam or Beijing ?

    If not why not ?

    • Spooked
      Dec 28, 2018 at 5:20 am

      Don’t know about Beijing but here in Taipei there are several. ….well,spotted 2……yellow bike holding areas with maybe 70 to 100 bikes….maybe the electric variety, but not seen one being ridden.
      In fact6very few bikes at all, and those mostly ancient with riders to match.
      Lots of young people on scooters, then cars, late model, bmws, Lexus etc. Havent seen any battered old wrecks (like i drive at home).
      Streets clean no grafffi, trains same and run on time, populace inc yong people well dressed, polite, seemingly focussed on work/study or whatever…..not hooning and getting pissed and obnoxious (like i do at home),
      I think the West is done and dusted. Al over bar the shouting…and warring.

    • Covey
      Dec 28, 2018 at 11:06 am

      Bikes in Amsterdam? I have a very good friend who lives just outside the city limits and as a single lady she has 4 bikes. Her “turnover” in bikes is quite high because although almost everybody in Amsterdam has a bike, if they are out on the town and need to get home, they “borrow” a bike and abandon the bike somewhere near their home. Thus, the Amsterdam bike population is constantly shifting around the city. Bikes in Holland are not cheap!! The traditional Dutch Bike is around €1000, hence you have a clapped out old bike to go to the railway station and leave in the racks, a nice one for shopping, a sports bike for weekend exercise, and a spare to cover your needs after someone has “borrowed” one of the other bikes!!

      Amsterdam has a high student population which feeds the “borrowing” problem!

    • MC01
      Dec 28, 2018 at 11:31 am

      Last year Amsterdam “turned the screw” on bike sharing services: the city government banned “free flow” services such as Flickbike and Donkey Republic, meaning the bike can be dropped off anywhere for “pickup”.
      Amsterdam, like the rest of The Netherlands, is becoming more and more chaotic by the day even if you move by public transport and foot, and the last thing the city needs, right next to “tourists” out for not-so-cheap thrills, are hundreds of bikes abandoned right next to very crowded places like train stations. Or thrown into channels.
      Only “docked” bike sharing companies can now operate in Amsterdam.

      Most of these bike sharing companies are, drum roll please, from Asia with oBike of Singapore leading the charge.
      These companies are taking advantage of what I can only call huge loopholes in the existing legislature to effectively dump their “recovery” services upon ever-suffering taxpayers. They are basically laughing in our collective face: the Zurich police has been trying for months to get oBike to remove all their bikes cluttering the city. OBike has simply stopped returning their calls so the city government has been forced to shoulder the financial burden of removing and storing these bikes: cannot simply thrown them in the scrap heap like Chinese authorities do. Yet oBike is still allowed to operate: go figure given how the local police is not exactly known for its lenience.
      The same applies to Rotterdam, London, Nijmegen… all the cities that didn’t force bike-sharing to use dedicated parking docks are dealing with big piles of abandoned bicycles.

      • Escher
        Dec 28, 2018 at 12:29 pm

        Obike has shuttered its operations in Singapore. Most users have lost their deposits.

        • MC01
          Dec 29, 2018 at 2:44 am

          As the saying goes “That was quick”.

          I always joke that American franchises come to Southern Europe when they are low on cash, desperate for growth or a deadly combination of both, but now we may add Asian startups with no clear path to profitability to the list.

    • char
      Dec 29, 2018 at 1:24 pm

      In the sixties you had the wittefietsenplan in Amsterdam. It made more business sense and they were hippies.

      The public railways have a bikeshare plan but for that you need to be A) a good customer of the railways and B) It is more dayrent with return to a station. But the bikes look nice.

      I don’t believe real public bikeshare plans like in Paris with automated stations and indestructible bikes exist in the Netherlands but i could be wrong

      ps. Amsterdam already has a lot of problems with bikes parking in the wrong spot and this is with bikes people care for. Don’t want to see the trouble with bikeshare bikes.

  11. Ook
    Dec 28, 2018 at 3:08 am

    Bike-sharing (and for that matter, Uber/Lyft-like dispatch operations) would be better handled as municipal utilities instead of as a vehicle to get bankers rich.

    • a citizen
      Dec 29, 2018 at 7:22 am

      Yeah, make tax payers handle it?

      • Ook
        Dec 29, 2018 at 9:18 pm

        Exactly. Uber-like dispatch and bike sharing are not stupid ideas, and they could be very useful to the general population. The main problem is right now than they are primarily focused at screwing investors out of their money and destroying the current infrastructure, instead of providing services to people.

        • Marty
          Dec 31, 2018 at 2:46 pm

          Exactly my take.

  12. Shane From Melbourne
    Dec 28, 2018 at 5:15 am

    In a global debt bubble, you don’t have to have a sound business model, just a endless number of suckers (either investors or taxpayers will do) that are willing to throw money at you. Finance these days is just an endless con game between the con artists and the marks.

    • Bernadette
      Dec 28, 2018 at 9:56 am

      AMEN. Well stated Shane from Melbourne. We, the people, have been ‘Hoodwinked’ to pick our pockets.

    • walter map
      Dec 28, 2018 at 10:00 am

      “Finance these days is just an endless con game between the con artists and the marks.”

      Boy, that’s hopeful. Actually, it does end, for both the cons and the marks.

  13. Rory Boyle
    Dec 28, 2018 at 9:13 am

    Wolf, slightly off topic, but I think it goes a bit towards valuation inanities like this. How are you calculating the trailing PE of the S&P given the one-time tax bumps juicing earnings. Any recs on where to find an adjustment for this to cut through the propaganda and apples to orange comps? Don’t have much use for forward multiples. Much obliged and apologies if I missed this in an earlier post. Great stuff as always.

    • Dec 28, 2018 at 11:01 am

      Most companies disclose the one-time charges and benefits due to the tax law as separate line item, and you can sort it out on their income statement for each company. But if you look at aggregate data, it’s tough. Also, many data providers report income, EPS, etc. on an adjusted basis, not GAAP numbers, which makes things even murkier.

      A year after the one-time tax charges/benefits were booked, these companies will show year-over-year comparisons to those numbers. In terms of income statements, this has been a period of extraordinarily noisy data since those tax law changes, and the noise will stay with us for another year.

      • Rory Boyle
        Dec 28, 2018 at 2:50 pm

        Thanks Wolf. Embedded in my comment was my own laziness to actually do the adjustments myself. Although that would be a fairly herculean task given the accounting tricks for an individual company let alone en masse. Case Shiller seems like a decent proxy but I’m not sure if the 10 year smoothing would be too forgiving given the extraordinary monetary policy of the last decade. Looking for a reasonable measuring stick for reallocations into and out of equity. I’m a long way from 100% but dont think 0% is smart either so a barometer to move between the 2, especially in determining when the inevitable reckoning is close to over.

    • IdahoPotato
      Dec 28, 2018 at 11:14 am

      @Rory Boyle
      This may clear the fog a bit.

      https://seekingalpha.com/article/4201988-tax-cuts-justify-u-s-stock-valuations.

      In a nutshell:

      “If we take our current median price to sales ratio of 2.60, and apply the new median earnings to sales ratio value of 0.1205 based on the tax cuts, this gives us a projected forward median price to earnings ratio value of 21.58….

      Now in order to get from the projected median P/E of 21.58, which is simply based on current numbers plus the effect of the tax cut, all the way down to a median P/E of 16.41, it would require 31.5% earnings growth across the board, ON TOP OF the effects of the corporate tax cut.”

      And I want a pony.

      • Rory Boyle
        Dec 28, 2018 at 2:41 pm

        Thanks! I saw that myself and thought it was a helpful article. Just a little dated now. I’ll keep me eyes out for something similar, but more recent.

  14. walter map
    Dec 28, 2018 at 10:00 am

    The bike-sharking fiasco. The peer-to-peer lending fiasco. The Silicon Valley rule. So many silly business models. And that’s only the business models. You don’t have to look too closely to notice that the aberrations permeate the entire spectrum of human activity.

    Which begs the question: why?

    What is it that causes people to pursue – and to so devoutly believe in – these sorts of glaring irrationalities? It is hardly enough to merely note that these irrationalities occur, as is done here, on this site, or that these build until they collapse under the sheer weight of their absurdity. That is all too easy because they are so common. And it is all too easy, and all too lazy, to merely note them, and to recommend nothing to properly manage them.

    Individually and collectively, people have so many self-destructive faults – ignorance, dishonesty, greed, hatred, sadism, masochism, irresponsibility, cruelty – that one may wonder how human civilization manages to survive, and indeed how it managed to arise in the first place. One can only surmise that human irrationality and self-destructiveness is somehow outweighed, however marginally, by human reason, decency, and industry.

    Which leads to other questions: can that balance be maintained? Can that balance be enhanced to ensure human survival and prosperity?

    The answer is no. Not even a chance.

    It is a fact that those who lie, cheat, and steal have a natural advantage over those who do not. This is why the world is owned and operated by those who lie, cheat, and steal, who are willing to carry out any level of destruction for their own wealth and power. That human civilization has managed to survive this long is only because such persons have been careful not to compass their own destruction while sacrificing everything around them, and have heretofore lacked the means. The capacity for self-destruction has previously been managed and limited to prevent self-destruction. But that has changed. They now very much have the means, and have decided to care only for short-term gain at the cost of long-term consequences, and they will not restrain themselves, and no one can constrain them.

    Recognizing this, the Committee to Save the Humans some years ago elected to disband and to limit its activity to simple observation of the pattern of behaviours and events leading to the collective suicide of human civilization. Russia, China, and other places have already achieved a nasty totalitarianism. American oligarchic democracy is only two dominoes away from dictatorship. Ecocide is fully guaranteed. We know where this is going and how it ends, and, being all too irrational but not utter idiots, so do you.

    “Do you believe,” said Candide, “that men have always massacred each other as they do to-day, that they have always been liars, cheats, traitors, ingrates, brigands, idiots, thieves, scoundrels, gluttons, drunkards, misers, envious, ambitious, bloody-minded, calumniators, debauchees, fanatics, hypocrites, and fools?”

    “Do you believe,” said Martin, “that hawks have always eaten pigeons when they have found them?”

    “Yes, without doubt,” said Candide.

    “Well, then,” said Martin, “if hawks have always had the same character why should you imagine that men may have changed theirs?”

    • c smith
      Dec 28, 2018 at 12:37 pm

      “Individually and collectively, people have so many self-destructive faults – ignorance, dishonesty, greed, hatred, sadism, masochism, irresponsibility, cruelty…” And free money encourages each and every one of them equally.

    • Paul M
      Dec 28, 2018 at 2:18 pm

      Ah Walter, what a cup of good cheer for the imminent start of 2019.

    • Colorado Kid
      Dec 28, 2018 at 2:57 pm

      One of the best (though admittedly gloomy) comments here ever. Very succinct and well put. Humanity in a nutshell, and unfortunately, all too true.

    • Cynic
      Dec 29, 2018 at 4:03 pm

      Or as the Roman said:

      ‘If you wish to see the true image of human nature, imagine the sacking and burning of a great city.’

      • David
        Dec 29, 2018 at 5:31 pm

        Come on, guys. There are good men. I’ve had the honour of knowing and working with some. We wouldn’t have got to where we are if they didn’t exist.

        History is a cycle.

        • walter map
          Dec 29, 2018 at 6:46 pm

          “History is a cycle.”

          No, it is not. The evidence shows otherwise and is definitive.

          For example. The present period of relative middle-class peace and prosperity is an aberration of history, made possible when your overlords (and overladies) lost much of their control in the first half of the 20th century. It had never happened before and will never happen again: as control is re-established the middle class will largely disappear and the historical model of rich and poor will be made permanent, because the means now exist, as the will always has. Civilization will necessarily collapse as a result of destructively unsustainable practices, and as it further declines it will become an increasingly libertarian dystopia and largely anarchic, with most people obsoleted, as at least half are already.

          Nothing cyclic about it.


          Take me to the station,
          And put me on a train.
          I’ve got no expectations
          To pass through here again.

  15. c smith
    Dec 28, 2018 at 10:51 am

    The only assets more miserably abused and discarded than rented assets are “shared” assets. At least with a rental, you have some skin in the game, and it needs to work for as long as you’ve rented it. Piles of discarded bikes 4 and 5 stories high are all you need to know about this business. They’re simple monuments to human nature.

  16. MD
    Dec 28, 2018 at 11:12 am

    “In January 2017, it set up operations in San Francisco but shut them down in March 2017…”

    LOL that’s impressively speedy ineptitude even in these days of meaningless silly money being chucked at and into everything that might attract enough other silly money to create a get-rich-quick exit opportunity before anyone realizes it’s a load of balls.

    Bet it took a Wharton MBA to think up that expansion plan. And I ain’t joking on that front.

    • MC01
      Dec 28, 2018 at 4:37 pm

      The track record for these bike sharing companies is simply astonishing: oBike Austria went from launch to seeking bankruptcy protection in three months. It dwarfs even the worst excesses of the Dotcom bubble for the simple reason there’s no “Next Microsoft” pitch possible as no bike sharing service ever turned a profit.

      If I was malicious I’d say these companies exist either to extract money from clueless venture capitalists or as a vehicle for capital flight from China, but Wolf is spot on here: the founders have never so much used the calculator app on their iPhone’s (which is a piece of junk, but PanecalPlus costs a few bucks so it’s not cool for the “sharing economy”).

  17. Bobber
    Dec 28, 2018 at 11:17 am

    What ever happened to all that block-chain talk? I guess it was much ballyhoo about nothing, or it was too difficult to implement profitably.

    I wonder what the next get rich fad will be. If it doesn’t cater to rich people, it won’t work because nobody else has any money.

  18. nofreelunch
    Dec 28, 2018 at 11:23 am

    This is what the shared society gets you: “Bikes are left behind broken, useless, and worthless.” My bike is in extremely tip top shape and I know every unique issue that could happen and mitigate them in advance, because its MY BIKE.

  19. AiSF
    Dec 28, 2018 at 11:24 am

    I’m just glad they are failing before the clamor to get rid of the docked, realistically-pried, bike share services (GoBike in SF, CitiBike in NYC, etc.) kicked in, since the “market” is providing nearly free bikes.

  20. Dec 28, 2018 at 12:04 pm

    Anyone up for the remake of the movie “Bicycle Thief”?

  21. cd
    Dec 28, 2018 at 12:39 pm

    bikes are seen as a target by horrible San Francisco drivers…..
    but insurance companies would print money if they put the bad drivers here on bikes…..

    more scooters, bikes and razors on the streets than the homeless here

  22. SocalJim
    Dec 28, 2018 at 1:21 pm

    The bay area startup bubble is also collapsing. It was being financed with easy money being injected into the economy by central bankers. Now, only potentially profitable startups get financing so most of the bay area startups are going under fast. Hopefully, the financial damage does not extend beyond Seattle and the bay area. We will see.

  23. Treepower
    Dec 28, 2018 at 1:36 pm

    Shouldn’t that be IPO2Zero?

  24. Tom Jones
    Dec 28, 2018 at 2:37 pm

    In my neighbrhood we still have a lot of “bike sharing”. Though it goes by a different name here; it’s called “theft”. I’ve inadvertently donated three nice bikes to this “bike share” group myself. Turns out it’s very profitable for some, while other lose their total investment. Also, law enforcement profits collecting unclaimed bicyles and then auctioning them off once or twice a year. Seems to work for everybody (except the original purchaser). Manufactures profit, stores profit, theieves profit, police profit, and even city or county profits with license fees. Only loser is the indivudual buyer, and if he’s lucky he get to use the bike for a while before it’s stolen…so even for him it’s not a total loss. And sometimes homeowners insurance will cover it. A great system. No share holders, CEO, or IPOs…just simple transfer of cash and asset. Actually, much more benign than Wall Street.

    • Cynic
      Dec 29, 2018 at 3:57 pm

      Bike thieves overheard cycling along in an English town:

      First Thief (indignant): ‘This effing bike’s crap, the brakes don’t work!’

      Second Thief: ‘You want to choose better what you effing nick then, dont ya?!’

      Currently, MOFO bikes are highly favoured by this section of the population for carrying out ambushes and robberies on the new bike-way.

  25. TheDreamer
    Dec 28, 2018 at 4:21 pm

    Found a good China video blogger a while back, ended up watching quite a few of his videos, as well as the joint videos. Wonderful for visual understanding of on the ground reality and cultural differences. I realized my own personal conception was not really accurate. Good quality too.

    He has a few pieces on the bike share in just 6 months. A Fad is an understatement. From the biggest thing to junkyard in less than a year:

    China Bike Share went insane: https://www.youtube.com/watch?v=kdsb2wwn-7g

    China Bike Graveyards: https://www.youtube.com/watch?v=1IYu4wzy9Lw

    The walk and talk style works well here – you can see the bikes everywhere. If you watch a lot of videos you can see visually the changes over the years. It’s interesting to note that the later videos things seem less successful on the ground, the good time magic is gone, and maybe it isn’t so great. Everything really struck me as deteriorating (literally falling apart). There are ones on cars. Also apartments. I also love when he bikes to the countryside – I learned about the “Nail House” and saw them. (A Nail house is like a nail that sticks up from a board – they add floors to shacks because compensation is based off how many floors you have – they often aren’t walled in). A lot of gaming the system or scams/fraud just seems very much a part of daily life. Other bloggers seem to have had enough and leaving.

  26. Ptb
    Dec 28, 2018 at 5:01 pm

    Where I live (small college town USA), Limebike showed up a year ago. The high school kids seem to love it, actually. So if it gets a new generation into the joy of riding on a nice day vs driving, why not?

    The bikes are kindof junk however. Built very heavy, as necessary to take the abuse, thus sluggish. Out in the weather all the time. There’s a night shift crew with a van that is repositioning them, a service crew as well to cover everything with the silver anti-seize goo, because they’re always out on the weather and we salt our roads. Doesn’t take a genius to do the math.

    Also, any adult can get a great 1980s steel road bike frame for free, or a late 90s aircraft aluminum frame (quite light, bulletproof) for maybe $25 from community recycling. Usually the local bike nerds will even fix it up for you.

    But hey, why not. Anything that gets cars off the road is okay by me.

    • a citizen
      Dec 29, 2018 at 7:56 am

      Blockchain was “Hoovered Up” by IBM in their on-going attempt to avert becoming the next GE. Having survived on P.T. Barnum’s Law for the better part of 50 years, blockchain, with its gibberish loaded and utterly specious elevator pitch, was “just the ticket” for the rapidly aging and increasingly irrelevant victim of upstart Microsoft (and Compaq).

      • a citizen
        Dec 29, 2018 at 8:01 am

        Sorry, this was posted in reply to Bobber, up the thread a bit…

  27. Kasadour
    Dec 28, 2018 at 8:18 pm

    They tried Bird Scooters in Portland for a while and now it’s gone. The Willamette Weekly published an article about how much Portland misses and needs it. The only thing i heard about Bird was some guy got cited for DUII while riding (driving?) a Bird Scooter. Bwwwahahaha.

  28. raxadian
    Dec 29, 2018 at 1:40 am

    *This now collapsed bike-sharing craze was based on the idea that you could survive and thrive by lending out bikes below cost, and even for free, as long as you could make it up with volume.*

    You can’t never ever make it up with volume with free stuff. You can make something temporarily free to have people test the product and so more willing to pay it once it stops being free but that’s it.

    Is amazing how cheap credit has created so many junk debt zombie unicorns.

    We may as well call them fairies because they drop dead if people stops believing in them.

    And people can’t be clapping hands all the time, more so if you offer a terrible service.

  29. breamrod
    Dec 29, 2018 at 12:23 pm

    once this credit bubble pops all of this will end hopefully. Either that or the fed will destroy our money. One way or another it will end.

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