The Uber vs Lyft market share wars are a great example of this misallocation. Due to all of the VC money sloshing around both companies are forced to raise and spend ungodly amounts of money in order to fight for market share. In a more rational monetary environment raising money would be more difficult and both companies would be more focused on profitability instead of market share.
The primary risk of this misallocation is that if/when a recession hits, revenues are likely to drop (or grow more slowly), VC money will probably dry up, and raising prices will become more difficult. So the only way to survive will probably be to cut back on expenses (basically fire a ton of employees). And this of course would just compound the recession.
So your solution to the Uber versus Lyft market share wars is unemployment? People in unrelated industries should be unemployed because you find cutthroat competition backed by VCs to be unseemly?
The primary risk of this misallocation is that if/when a recession hits, revenues are likely to drop (or grow more slowly), VC money will probably dry up, and raising prices will become more difficult. So the only way to survive will probably be to cut back on expenses (basically fire a ton of employees). And this of course would just compound the recession.