Venture capitalist David Friedberg has a contrarian take on New York City Mayor Zohran Mamdani's plan to open city-owned grocery stores. While many critics expect the idea to flop, Friedberg thinks they're missing the point—these stores might not fail at all. In fact, they could become wildly popular, and that's exactly what worries him.

Grocery Stores Could Become Popular

Speaking on a recent episode of The All-In podcast, Friedberg said the proposal's political appeal is being underestimated. "I think that… everyone's got it a little bit wrong in assuming that this thing is going to radically fail," he said. "I think these things are going to create a radical spectacle… because at the end of the day, no one has to pay the bill, because the bill doesn't come due for some time."

Instead of collapsing immediately, Friedberg predicted the stores would attract heavy demand thanks to government-backed discounts. "They're going to outperform Whole Foods. They're going to outperform Safeway. They're going to outperform Albertsons Companies Inc. (NYSE: ACI)," he said. "They're going to be so in demand that… every other city in America will look to these grocery stores and say, 'We want the same.'"

He argued that governments could keep expanding subsidies as consumers demand lower prices, creating a cycle that requires even more public support over time.

Proposal Faces Criticism

Mamdani has proposed opening five city-owned grocery stores, one in each New York City borough, offering essential food items at roughly 30% below typical retail prices. The city has allocated $70M in initial funding for the initiative.

The proposal has drawn criticism from economists and business leaders. In April, economist Peter Schiff argued government-owned grocery stores would be less efficient than private retailers because grocery profit margins are already thin. Mamdani responded that he welcomed the competition, saying the city-run stores would make groceries more affordable for New Yorkers.

More recently, O'Leary Ventures chairman Kevin O'Leary questioned the economics of the proposal, warning that offering groceries at a 30% discount would result in losses on every sale. "Who will pay for those losses?" O'Leary asked, arguing taxpayers would ultimately bear the cost.

The proposal has also attracted criticism from Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk, who this week called Mamdani a "thief" and a "liar," arguing artificial intelligence and robots would eventually provide free goods and services without government-operated grocery stores.

Political Context

Friedberg said his concern extends beyond New York, arguing the stores could encourage similar government-backed programs elsewhere if they gain public support. "It's a sad state," he said, adding that successful subsidized grocery stores could create broader enthusiasm for socialist policies before taxpayers fully bear their long-term costs.