Why Unprofitable Companies Are Winning in 2020

The video explores the concept of profit in business, highlighting the rise of 'zombie companies' that operate without turning a profit. It examines why investors continue to fund these businesses, focusing on the growth-at-all-costs mindset and the role of venture capital. The process of funding rounds and IPOs is detailed, showing how companies attract different types of investors. The video concludes by analyzing the economic impact of profitless companies, questioning their sustainability and potential market distortions.

What is a 'zombie company'?

• A company that is in the food industry

• A company that only operates during Halloween

• A company that has been in business for over 100 years

• A company that has never turned a profit

Why do some businesses start out unprofitable?

• They are part of a government program

• They want to avoid paying taxes

• They are not interested in making money

• They focus on building infrastructure and customer base

What is the significance of reaching a break-even point for a business?

• It shows the business is ready for a merger

• It indicates the business is ready to close

• It means the business has no competition

• It means the business can cover its own expenses

What role do angel investors play in a business's growth?

• They offer free marketing services

• They guarantee the business's success

• They manage the daily operations of the business

• They provide initial funding for a share of ownership

Why might a company choose to go public through an IPO?

• To change the company's name

• To reduce the number of employees

• To avoid paying taxes

• To allow venture capital firms to cash out their shares

What ethical concern is raised by the investment strategy of some unprofitable companies?

• It resembles a Ponzi scheme

• It violates environmental laws

• It leads to employee layoffs

• It involves insider trading

What was the controversy surrounding Nikola's investment strategy?

• They had a monopoly in their industry

• They did not have a working prototype of their product

• They were accused of tax evasion

• They were involved in a major environmental scandal

How do profitless companies impact the economy during downturns?

• They lead to increased unemployment

• They reduce consumer spending

• They are more resilient and can take market share

• They cause inflation to rise

What is a potential negative effect of investors funding profitless companies?

• It causes a decrease in product quality

• It results in higher employee turnover

• It can lead to market distortions and misallocated resources

• It increases the company's tax burden

What is the hope for the future of profitless companies?

• They will be acquired by the government

• They will continue to operate without making a profit

• They will merge with larger companies

• They will eventually become profitable and pay dividends