‘Tech-Enabled’ Often Means Thin Margins

David Sacks: The problem with this new generation of tech-enabled businesses is that their economics and business models look similar to the companies they’re replacing.

Uber’s business model looks much more like the taxicab industry than a purely software business. Subsidizing rides and guaranteeing the drivers a minimum fare makes them take on the economics of the taxicab industry.

WeWork’s economics look like the model used by commercial landlords: They are leasing space at a markup over what they’re paying.

These are thin-margin businesses. If you approach them with the mindset of a software business, it will lead to the wrong cultural attributes and a lack of cost consciousness—and you might not even build up the finance function you need for this kind of business.