AI Wealth Truth (53): Why You Are the One Who Ultimately Pays for Platform "Subsidy Wars"

I. Ride-hailing for 0.01. Food delivery with a 10 RMB subsidy. Shared bikes for 0.01 per ride. These subsidies make you feel like you got a bargain. But have you asked: who paid for this, and why?

II. The answer is: venture capital (VC) paid. The goal is: burn money to grab market share, build monopoly, then raise prices to recover. The subsidy you enjoy is bait.

III. Here is the typical script of a subsidy war:

IV. Phase 1: burn money to grab the market. Multiple companies enter the market. All have VC backing. They subsidize aggressively to acquire users. Prices drop below cost. Everyone loses money.

V. Phase 2: eliminate competitors. The player with the deepest pockets survives the longest. Others run out of money, exit, or get acquired. The market goes from many players to one or two. Competition disappears.

VI. Phase 3: monopoly pricing. The remaining players start raising prices. Subsidies end, prices return to normal, or even higher. Users have formed habits and do not leave easily. Now the harvesting begins.

VII. What do you experience as a user?

VIII. First, you enjoy it: cheap rides, cheap delivery, cheap goods. You think the internet is great, and competition drove prices down. A consumption habit is being trained.

IX. Then, you pay: prices rise and service gets worse. You are already used to these services and cannot easily quit. You accept the new price. The money you saved during subsidies gets repaid with interest under monopoly.

X. Look at some real cases:

XI. Didi. During the subsidy war, ride-hailing was much cheaper than taxis. After Uber China was acquired, subsidies shrank and prices rose. Today, Didi is often not cheaper than taxis, and sometimes even more expensive. Low prices were temporary.

XII. Food delivery platforms. Early on, discounts were large and delivery fees were low, sometimes free. Today, discounts are smaller, delivery fees are higher, and platform take rates are high. Merchants pass costs to consumers, or cut quality. You pay more, or you get worse.

XIII. Shared bikes. The 0.01 era is long gone. Now, a single ride can cost 1.5 to 3 RMB. Sometimes it is more expensive than public transit. Subsidies were bait. Now the net is closing.

XIV. Who wins this game?

XV. VCs and founders. They cash out when the company goes public or gets acquired. Even if the company fails later, they may have already taken money off the table. Risk is shifted. Returns are locked in.

XVI. The remaining monopolists. They wipe out competitors and control the market. They can price freely. Consumers have no real choice.

XVII. The losers are consumers and small merchants. Consumers pay higher prices after subsidies disappear. Small merchants have margins squeezed by platform take rates. Value is extracted from both ends.

XVIII. In the AI era, this game will replay.

XIX. The AI field is also burning money. Free ChatGPT. Free AI tools. This is subsidized by VC money. Once the market structure stabilizes, charging begins.

XX. And AI's monopoly dynamics may be even stronger. Training frontier models requires massive resources. Only a few players can afford it. Markets naturally tend to concentrate. AI may become more monopolistic than food delivery.

XXI. How should you respond?

XXII. 1. Enjoy subsidies, but do not become dependent. Use subsidies while they exist. But keep alternatives in mind. Do not let yourself get locked in.

XXIII. 2. Support competitors. If there are multiple players, try using the non-dominant ones. As long as competition exists, prices are less likely to run wild. Your choices have impact.

XXIV. 3. Prepare for the true cost. Subsidy prices are not real prices. Real prices are the prices that let companies be profitable. Treat subsidies as windfalls, not as normal.

XXV. Subsidy wars look like platforms competing. In reality, capital is competing. Consumers are the battlefield, and the prize. The low price is temporary. The habit you form is long-term. In the AI era, a new subsidy war is underway. Free AI tools feel great. Once the market stabilizes, the bill arrives.