Uber is headed for a crash
December 9, 2018 6:07 AM Subscribe
What has made Uber a good deal for users makes it a lousy investment proposition. The notion that Uber, the most highly valued private company in the world, is a textbook “bezzle” — John Kenneth Galbraith’s coinage for an investment swindle where the losses have yet to be recognized — is likely to come as a surprise to its many satisfied customers.
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Uber’s new CEO Dara Khosrowshahi effectively admitted that Uber isn’t profitable in any market when you factor in corporate overheads.
I think what people were investing in was less the service, and more the disruption of traditional taxi licenses and regulations, and the possibility of self-driving cars without drivers making pure profit.
What's finally hitting is the major cities putting in laws or trying to get laws in against both of those things and the few deaths attributed to the self driving system.
posted by 80 Cats in a Dog Suit at 6:18 AM on December 9, 2018 [3 favorites]
What's finally hitting is the major cities putting in laws or trying to get laws in against both of those things and the few deaths attributed to the self driving system.
posted by 80 Cats in a Dog Suit at 6:18 AM on December 9, 2018 [3 favorites]
I'm obviously not an Uber investor since I'm not a failson scion of any midcentury Superfund-site fortunes, but I think the value proposition is mainly that they think they can monopolize the rideshare market and jack prices up (and wages down) afterward. The possibility of self-driving cars reducing the cost of providing the service is just icing on the cake.
The problem that all these idiot private investors have is that they were just totally wrong because there is just no "moat" (to use the SV lingo). The theory is that they will control the users, who will automatically reach for the "Uber" app, because that's become a generic word for rideshare. Unfortunately, that isn't the case and people aren't stupid. We've had several natural experiments where Uber and Lyft pull out of a town.
I live in Austin, where this was briefly the case. IMMEDIATELY after that happened, all the drivers and riders just changed apps to one of several local competitors, and everything went ahead as usual. It just doesn't take much capital to start an Uber competitor: an app and some billboards or flyers. If Uber imploded tomorrow, Lyft or some brand-new upstart could absorb the business immediately because these companies are literally just middlemen: they don't control the demand or the supply.
In other words, a lot of dumb money is about to go up in smoke.
posted by LiteOpera at 6:32 AM on December 9, 2018 [90 favorites]
The problem that all these idiot private investors have is that they were just totally wrong because there is just no "moat" (to use the SV lingo). The theory is that they will control the users, who will automatically reach for the "Uber" app, because that's become a generic word for rideshare. Unfortunately, that isn't the case and people aren't stupid. We've had several natural experiments where Uber and Lyft pull out of a town.
I live in Austin, where this was briefly the case. IMMEDIATELY after that happened, all the drivers and riders just changed apps to one of several local competitors, and everything went ahead as usual. It just doesn't take much capital to start an Uber competitor: an app and some billboards or flyers. If Uber imploded tomorrow, Lyft or some brand-new upstart could absorb the business immediately because these companies are literally just middlemen: they don't control the demand or the supply.
In other words, a lot of dumb money is about to go up in smoke.
posted by LiteOpera at 6:32 AM on December 9, 2018 [90 favorites]
Uber had a shot in markets where licensing rules/medallions created artificial scarcity that allowed a surplus to accrue to exisiting street hail car hire permit owners. The could disintermediate and capture a smaller surplus without making capital investments. The problem is it's just not that hard to create a competitor and Uber needed to be willing to cut their take of that surplus to keep competitors out, which they didn't.
Anywhere else the model never had a chance because there wasn't an artificial surplus. It's just a better cab dispatch model, that benefitted for some period of time until more folks figured driving a car for a living is not great.
It's ultimately a real business, but a much smaller one than the VCs think.
posted by JPD at 6:37 AM on December 9, 2018 [6 favorites]
Anywhere else the model never had a chance because there wasn't an artificial surplus. It's just a better cab dispatch model, that benefitted for some period of time until more folks figured driving a car for a living is not great.
It's ultimately a real business, but a much smaller one than the VCs think.
posted by JPD at 6:37 AM on December 9, 2018 [6 favorites]
I dunno, I don't think Uber is too different from any other venture-backed startup. I mean, it's easy to laugh at companies that have underpants gnome business plans, but very few of today's most powerful tech companies were profitable for the first several years. For example, I remember a lot of skepticism around whether FB would ever be profitable, or their stock rise above their disastrous $38 IPO.
So it's not impossible that Uber could one day be a financial success. I will agree there's little or no "moat" around their service, although I have heard that's only in major US cities. Like, apparently Uber has coverage in cities where Lyft and others don't have much of a presence, if any at all. So that could be an advantage.
posted by panama joe at 6:42 AM on December 9, 2018 [1 favorite]
So it's not impossible that Uber could one day be a financial success. I will agree there's little or no "moat" around their service, although I have heard that's only in major US cities. Like, apparently Uber has coverage in cities where Lyft and others don't have much of a presence, if any at all. So that could be an advantage.
posted by panama joe at 6:42 AM on December 9, 2018 [1 favorite]
panama joe: I dunno, I don't think Uber is too different from any other venture-backed startup.
From the article:
Comparisons of Uber to other storied tech wunderkinder show Uber is not on the same trajectory. No ultimately successful major technology company has been as deeply unprofitable for anywhere remotely as long as Uber has been. After nine years, Uber isn’t within hailing distance of making money and continues to bleed more red ink than any start-up in history. By contrast, Facebook and Amazon were solidly cash-flow positive by their fifth year.
posted by mecran01 at 6:44 AM on December 9, 2018 [30 favorites]
The thing is, Uber actually could have done some things differently, but it chose not to. The complaint procedure is abysmal, even for actual fraud, where people say they picked you up but did not, or for serious harassment, and it doesn’t have to be. The original idea was that people wouldn’t harass you or be shitty because of the ratings, but with so much turnover because of bad driver pay, the ratings don’t mean as much anymore - especially with rating inflation.
posted by corb at 6:49 AM on December 9, 2018 [7 favorites]
posted by corb at 6:49 AM on December 9, 2018 [7 favorites]
Let's all take a moment to reflect that Uber's pressure on Taxi Medallions was a significant part of Michael Cohen's financial issues. If they crater and disappear, I will always credit them with that small benefit to civilization.
posted by mikelieman at 6:52 AM on December 9, 2018 [62 favorites]
posted by mikelieman at 6:52 AM on December 9, 2018 [62 favorites]
all the drivers and riders just changed apps
It's been a very long time since I've seen an Uber car here that did not also have a Lyft light up thingy in the window as well. I doubt know if drivers are technically allowed to do that but I don't think anyone is trying too hard to stop them. The thing about having no loyalty to your "independent contractors" is that they have no incentive to be at all loyal to you.
posted by soren_lorensen at 7:21 AM on December 9, 2018 [49 favorites]
It's been a very long time since I've seen an Uber car here that did not also have a Lyft light up thingy in the window as well. I doubt know if drivers are technically allowed to do that but I don't think anyone is trying too hard to stop them. The thing about having no loyalty to your "independent contractors" is that they have no incentive to be at all loyal to you.
posted by soren_lorensen at 7:21 AM on December 9, 2018 [49 favorites]
So it's not impossible that Uber could one day be a financial successUber is different because there’s no way to get the high-multiplier returns. Google or Facebook are very profitable because they can sell a billion ad impressions with development and infrastructure costs which are much less than a thousand times what it costs to deliver a million ad impressions. Uber is based on the least efficient form of transportation and their costs go up close to linearly with each ride because most of it isn’t IT expenditures where economies of scale work out in their favor.
The problem is that they’ve been pitching investors and compensating their employees as if they were in the first group. There will be someone making profits in this space but they’ll be more like grocery stores or airlines than Google, and it’s really hard to change the structure of an entire business to run lean after years of money-is-no-object hubris, especially since those investors have provided close to a 50% subsidy which riders are not going to be quick to pick up.
posted by adamsc at 7:26 AM on December 9, 2018 [15 favorites]
LiteOpera: "I think the value proposition is mainly that they think they can monopolize the rideshare market and jack prices up (and wages down) afterward."
This is so obviously looney the premise should be classed as snake oil.
JPD: "Uber had a shot in markets where licensing rules/medallions created artificial scarcity that allowed a surplus to accrue to exisiting street hail car hire permit owners."
They didn't though. By showing that the medallion system (or other controls on new entrants to the taxi business) could be either ignored or worked around by chutzpah or legal means they just showed everyone else who wanted to race to the bottom that they too could get into the taxi business. Any success would immediately spin up competitors who would eat their lunch.
If Uber had wanted to follow in FB footsteps they should have just developed their dispatching idea and then sold it to every taxi company on the planet. I'd bet that if Uber is still around 10 years from now that's what they have done. That or continue on as a hobby business of trust fund capitalists.
posted by Mitheral at 7:39 AM on December 9, 2018 [10 favorites]
This is so obviously looney the premise should be classed as snake oil.
JPD: "Uber had a shot in markets where licensing rules/medallions created artificial scarcity that allowed a surplus to accrue to exisiting street hail car hire permit owners."
They didn't though. By showing that the medallion system (or other controls on new entrants to the taxi business) could be either ignored or worked around by chutzpah or legal means they just showed everyone else who wanted to race to the bottom that they too could get into the taxi business. Any success would immediately spin up competitors who would eat their lunch.
If Uber had wanted to follow in FB footsteps they should have just developed their dispatching idea and then sold it to every taxi company on the planet. I'd bet that if Uber is still around 10 years from now that's what they have done. That or continue on as a hobby business of trust fund capitalists.
posted by Mitheral at 7:39 AM on December 9, 2018 [10 favorites]
I know it’s normal to some extent for businesses to run on credit but man, it’s always stark to see that a business in the red can just... continue running but if I personally get into the red I’ll be couch surfing.
posted by cricketcello at 7:47 AM on December 9, 2018 [30 favorites]
posted by cricketcello at 7:47 AM on December 9, 2018 [30 favorites]
It also demonstrates how the stock market can prop up the value of a business just because it likes the idea of that business. Amazon benefits from precisely that phenomenon. It routinely loses enormous amounts of money on failed projects, and where most retailers with a billion-dollar quarterly loss would see a major correction in their stock value as a result, Wall Street just brushes it off because “Amazon is different”. It’s not different, it’s just that the stock market is running on voodoo and “gut feeling” just like these companies are.
posted by Autumnheart at 8:06 AM on December 9, 2018 [8 favorites]
posted by Autumnheart at 8:06 AM on December 9, 2018 [8 favorites]
(Which is not precisely applicable to Uber since it’s a private company, but it goes to show that investors aren’t using common sense or objective economic principles to decide where their money goes.)
posted by Autumnheart at 8:07 AM on December 9, 2018 [1 favorite]
posted by Autumnheart at 8:07 AM on December 9, 2018 [1 favorite]
I'm still trying to figure out whether Uber is the Bitcoin of taxis or whether Bitcoin is the Uber of money.
posted by clawsoon at 8:07 AM on December 9, 2018 [37 favorites]
posted by clawsoon at 8:07 AM on December 9, 2018 [37 favorites]
Amazon doesn’t lose money, though — they’ve had a couple of down quarters in 2012 and 2014 but they are profitable for the majority and they have never lost money at Uber’s scale. Amazon has shown that its failed projects don’t hurt them and its successful ones (like AWS) generate enormous revenue and control for the company. If Wall Street has a crush on them it’s because Amazon has consistently delivered for its investors over decades. Uber has done the opposite.
posted by migurski at 8:20 AM on December 9, 2018 [21 favorites]
posted by migurski at 8:20 AM on December 9, 2018 [21 favorites]
There was an article about Davos a couple years ago in which the writer, a business journalist, felt smug about being invited to Davos, and smugger still that they had a press credential that afforded an extra level of access, like rides on conference buses, admission to certain events.
Soon though they noticed meeting rooms and cocktail events that they weren’t permitted to attend. And that there were helicopters that ferried even more properly credentialed people to even more exclusive meetings and events, and so on, higher and higher levels of exclusivity leading ultimately to the folks who really made the decisions that moved billions and billions of dollars in an instant cloistered in a secret meeting room atop a Swiss mountain.
If you look at the lineup of big money investors who’ve sunk billions into Uber, those are the people in the room at the top of the mountain making the big billion dollar decisions every day and surely they must know something about Uber’s prospects the rest of us don’t. Don’t they?
Maybe they don’t. Probably they worry there are other rooms in other places where people who really understand what’s happening are plotting to sink their investment and take their money.
posted by notyou at 8:21 AM on December 9, 2018 [7 favorites]
Soon though they noticed meeting rooms and cocktail events that they weren’t permitted to attend. And that there were helicopters that ferried even more properly credentialed people to even more exclusive meetings and events, and so on, higher and higher levels of exclusivity leading ultimately to the folks who really made the decisions that moved billions and billions of dollars in an instant cloistered in a secret meeting room atop a Swiss mountain.
If you look at the lineup of big money investors who’ve sunk billions into Uber, those are the people in the room at the top of the mountain making the big billion dollar decisions every day and surely they must know something about Uber’s prospects the rest of us don’t. Don’t they?
Maybe they don’t. Probably they worry there are other rooms in other places where people who really understand what’s happening are plotting to sink their investment and take their money.
posted by notyou at 8:21 AM on December 9, 2018 [7 favorites]
In other words, a lot of dumb money is about to go up in smoke.
My favorite part of this is that second and third (and Nth) movers into this market might actually work while uber crashes and burns. Like if Uber paved the way for local cooperatives of part time drivers (maybe paired with specialized insurance offerings? Idk) to make decent money, I will be DELIGHTED.
posted by schadenfrau at 8:23 AM on December 9, 2018 [22 favorites]
My favorite part of this is that second and third (and Nth) movers into this market might actually work while uber crashes and burns. Like if Uber paved the way for local cooperatives of part time drivers (maybe paired with specialized insurance offerings? Idk) to make decent money, I will be DELIGHTED.
posted by schadenfrau at 8:23 AM on December 9, 2018 [22 favorites]
I know the old monopoly laws are pretty much toast, but how is it legal to come in to a market and fuck the regulated competition using borrowed money? There is no such thing as a free market at this stage of capitalism. If only the government had the power to level the playing field a little.
I typo'ed that as paying field, and it made a weird kind of sense.
posted by theora55 at 8:25 AM on December 9, 2018 [8 favorites]
I typo'ed that as paying field, and it made a weird kind of sense.
posted by theora55 at 8:25 AM on December 9, 2018 [8 favorites]
This article is total non-sense.
"Uber does regularly claim that its app creates economies of scale for drivers — but for that to be the case, adding more drivers would have to benefit drivers. It doesn’t. More drivers means more competition for available jobs, which means less utilization per driver."
Ofcourse having more drivers benefits other drivers. It creates the market. If there is only one driver, then potential customers cannot expect them to available and thus there are no customer. Uber has totally changed transportation options in suburbia.
"Unlike digital businesses, the cab industry does not have significant scale economies; that’s why there have never been city-level cab monopolies, consolidation plays, or even significant regional operators."
It has massive scale of economics. Taxi business in most places outside cities(NYC) and countries (Finland) never worked because matching the demand and supply never happened. Calling a taxi company was a lottery on whether someone would or would not come. Now, I can use the same app in my suburb as well as in Mexico City. Comparing taxi business as it was to the [latent] need for transportation is silly.
posted by zeikka at 8:25 AM on December 9, 2018 [3 favorites]
"Uber does regularly claim that its app creates economies of scale for drivers — but for that to be the case, adding more drivers would have to benefit drivers. It doesn’t. More drivers means more competition for available jobs, which means less utilization per driver."
Ofcourse having more drivers benefits other drivers. It creates the market. If there is only one driver, then potential customers cannot expect them to available and thus there are no customer. Uber has totally changed transportation options in suburbia.
"Unlike digital businesses, the cab industry does not have significant scale economies; that’s why there have never been city-level cab monopolies, consolidation plays, or even significant regional operators."
It has massive scale of economics. Taxi business in most places outside cities(NYC) and countries (Finland) never worked because matching the demand and supply never happened. Calling a taxi company was a lottery on whether someone would or would not come. Now, I can use the same app in my suburb as well as in Mexico City. Comparing taxi business as it was to the [latent] need for transportation is silly.
posted by zeikka at 8:25 AM on December 9, 2018 [3 favorites]
The article’s use of “scale” refers to the cost structure: you may be able to get a cab anywhere in the world but the costs (gas, cars, people) rise linearly with drivers instead of going down. Uber has changed transportation in suburbia largely by subsidizing it, a state of affairs that cannot continue indefinitely.
posted by migurski at 8:30 AM on December 9, 2018 [25 favorites]
posted by migurski at 8:30 AM on December 9, 2018 [25 favorites]
Lol yeah I came back to say that if you’ve been aware of Yves Smith and Naked Capitalism for the last, idk, 10 years? You’re aware that she has a tendency to make, uh, really attention-grabbing predictions that turn out to be, shall we say, not right. I don’t know precisely what her batting average is, but I know I wouldn’t regularly bet her picks.
posted by schadenfrau at 8:32 AM on December 9, 2018
posted by schadenfrau at 8:32 AM on December 9, 2018
Ofcourse having more drivers benefits other drivers.
Up to a point, but this is no different than regular taxi drivers. The difference is that Uber makes it easy for Joe Schmoe to moonlight as a driver, because he doesn't have to bother with all that pesky licensing etc.
Calling a taxi company was a lottery on whether someone would or would not come. Now, I can use the same app in my suburb as well as in Mexico City.
Which only works because Uber is subsidizing the whole thing. The reason taxi companies struggle in low utilization markets (suburbia, where the vast majority of people drive themselves) is partly because there's a disconnect between the demand for drivers and the indivisibility of actual humans. There are lots of hours during which there simply isn't enough business to pay an actual person enough to bother driving once you factor in costs like feeding that person and gas for their cab.
posted by axiom at 8:32 AM on December 9, 2018 [8 favorites]
Up to a point, but this is no different than regular taxi drivers. The difference is that Uber makes it easy for Joe Schmoe to moonlight as a driver, because he doesn't have to bother with all that pesky licensing etc.
Calling a taxi company was a lottery on whether someone would or would not come. Now, I can use the same app in my suburb as well as in Mexico City.
Which only works because Uber is subsidizing the whole thing. The reason taxi companies struggle in low utilization markets (suburbia, where the vast majority of people drive themselves) is partly because there's a disconnect between the demand for drivers and the indivisibility of actual humans. There are lots of hours during which there simply isn't enough business to pay an actual person enough to bother driving once you factor in costs like feeding that person and gas for their cab.
posted by axiom at 8:32 AM on December 9, 2018 [8 favorites]
That ALSO said: I’d probably bet this one.
posted by schadenfrau at 8:33 AM on December 9, 2018
posted by schadenfrau at 8:33 AM on December 9, 2018
> If you look at the lineup of big money investors who’ve sunk billions into Uber, those are the people in the room at the top of the mountain making the big billion dollar decisions every day and surely they must know something about Uber’s prospects the rest of us don’t. Don’t they?
If I had to place a bet, I'd bet on those people having fallen for silicon valley propaganda about self-driving cars being feasible.
> Ofcourse having more drivers benefits other drivers. It creates the market. If there is only one driver, then potential customers cannot expect them to available and thus there are no customer. Uber has totally changed transportation options in suburbia.
Comrade, you are very good at analyzing the phase before market saturation, where, indeed, having more drivers makes a given network more valuable for both drivers and passengers. However, once market saturation is reached, drivers begin competing for passengers and the addition of new drivers starts driving the rate of profit for each individual driver down, until (absent regulation) that rate of profit falls to match the cost of providing the service. In practice, because people tend to discount their own costs (i.e. the additional cost of car maintenance produced through driving for silicon valley app-dispatch taxi companies), the profit rate for uber/lyft "independent contractors" becomes negative.
Driving for lyft or uber is, right now, equivalent to taking a loan from your car. You get money to eat and pay rent now, but you lose all that money down the road in maintenance costs.
posted by Reclusive Novelist Thomas Pynchon at 8:33 AM on December 9, 2018 [29 favorites]
If I had to place a bet, I'd bet on those people having fallen for silicon valley propaganda about self-driving cars being feasible.
> Ofcourse having more drivers benefits other drivers. It creates the market. If there is only one driver, then potential customers cannot expect them to available and thus there are no customer. Uber has totally changed transportation options in suburbia.
Comrade, you are very good at analyzing the phase before market saturation, where, indeed, having more drivers makes a given network more valuable for both drivers and passengers. However, once market saturation is reached, drivers begin competing for passengers and the addition of new drivers starts driving the rate of profit for each individual driver down, until (absent regulation) that rate of profit falls to match the cost of providing the service. In practice, because people tend to discount their own costs (i.e. the additional cost of car maintenance produced through driving for silicon valley app-dispatch taxi companies), the profit rate for uber/lyft "independent contractors" becomes negative.
Driving for lyft or uber is, right now, equivalent to taking a loan from your car. You get money to eat and pay rent now, but you lose all that money down the road in maintenance costs.
posted by Reclusive Novelist Thomas Pynchon at 8:33 AM on December 9, 2018 [29 favorites]
"Let's turn the world's least efficient form of transportation into a side hustle and manage it with a huge international corporation" was never going to be profitable. Enjoy those cheap rides while you can, I guess?
posted by seanmpuckett at 8:37 AM on December 9, 2018 [20 favorites]
posted by seanmpuckett at 8:37 AM on December 9, 2018 [20 favorites]
...[they] could disintermediate and capture a smaller surplus without making capital investment...
...Uber paved the way for local cooperatives of part time drivers...
^This. Fundamentally, Uber investors' problem is that they have put a lot of capital into an economic activity (dispatching cabs) that doesn't require a lot of capital. It's actually a much better fit for a coop model. Drivers, who engage in a labor and capital-heavy economic activity (actually driving people around) can pool resources to pay for the small, cheap piece that they need (the hailing app and infrastructure).
Ride Austin is doing basically this, and sprang up during the previously-mentioned natural experiment where Uber and Lyft left town for a few months. A nationwide Uber implosion will almost certainly produce more local non-profits like this to fill the vacuum, and hopefully some much bigger regional or national ones.
posted by LiteOpera at 8:39 AM on December 9, 2018 [10 favorites]
...Uber paved the way for local cooperatives of part time drivers...
^This. Fundamentally, Uber investors' problem is that they have put a lot of capital into an economic activity (dispatching cabs) that doesn't require a lot of capital. It's actually a much better fit for a coop model. Drivers, who engage in a labor and capital-heavy economic activity (actually driving people around) can pool resources to pay for the small, cheap piece that they need (the hailing app and infrastructure).
Ride Austin is doing basically this, and sprang up during the previously-mentioned natural experiment where Uber and Lyft left town for a few months. A nationwide Uber implosion will almost certainly produce more local non-profits like this to fill the vacuum, and hopefully some much bigger regional or national ones.
posted by LiteOpera at 8:39 AM on December 9, 2018 [10 favorites]
Amazon benefits from precisely that phenomenon. It routinely loses enormous amounts of money on failed projects, and where most retailers with a billion-dollar quarterly loss would see a major correction in their stock value as a result,Amazon has units which have been profitable for over two decades. They spend money on startup costs for new businesses but any time they want to show greater profits they can slow or cut expansion and fall back on the mature businesses. Lazy “analysts” sometimes misrepresent this but that’s because they don’t understand that Bezos isn’t trying to run a high margin business.
In contrast, Uber has never been anywhere close to profitable even if you assume that their investors are content not making a profit because they constantly require new money to subsidize fares down to the current level. They have no option for being profitable other than raising prices other than a Hail Mary gamble that self-driving car technology will become so cheap that they can capture the drivers’ part and they’ll be so popular that competitors won’t push prices down.
posted by adamsc at 8:42 AM on December 9, 2018 [6 favorites]
How are groups like ride austin doing? The one reason I'm not all-in on the coop model where the drivers cast off the silicon valley parasites and implement their own apps/dispatch algorithms is because of the stuff we've heard about how uber and lyft need massive subsidies to stay afloat.
Is it possible for a rideshare cooperative to charge rates such that they can stay running without subsidies?
posted by Reclusive Novelist Thomas Pynchon at 8:44 AM on December 9, 2018 [3 favorites]
Is it possible for a rideshare cooperative to charge rates such that they can stay running without subsidies?
posted by Reclusive Novelist Thomas Pynchon at 8:44 AM on December 9, 2018 [3 favorites]
Reclusive Novelist Thomas Pynchon: "drivers begin competing for passengers and the addition of new drivers starts driving the rate of profit for each individual driver down, until (absent regulation) that rate of profit falls to match the cost of providing the service."
Worse income tends to yo-yo between covering costs barely and not quite covering costs and the only only cost with any slack at all is driver salary and maintenance. Give that a few cycles and next thing you know the only people driving are so under qualified they can't do literally anything else and the cars haven't had there brakes checked in a year.
posted by Mitheral at 8:45 AM on December 9, 2018 [4 favorites]
Worse income tends to yo-yo between covering costs barely and not quite covering costs and the only only cost with any slack at all is driver salary and maintenance. Give that a few cycles and next thing you know the only people driving are so under qualified they can't do literally anything else and the cars haven't had there brakes checked in a year.
posted by Mitheral at 8:45 AM on December 9, 2018 [4 favorites]
"The article’s use of “scale” refers to the cost structure: you may be able to get a cab anywhere in the world but the costs (gas, cars, people) rise linearly with drivers instead of going down." And ignores the cost of matching the driver and passenger. Low utilization is very costly for both.
"Which only works because Uber is subsidizing the whole thing. " I do think that the service is priced too low and they should raise their prices. The universal availability of safe rides is worth more and I think people would pay more.
"It's actually a much better fit for a coop model." Too bad that coop model doesn't work. Previously I could not get a ride where I live, nor I could know which taxi is safe to take in Mexico City. The power is in the network.
posted by zeikka at 8:52 AM on December 9, 2018 [2 favorites]
"Which only works because Uber is subsidizing the whole thing. " I do think that the service is priced too low and they should raise their prices. The universal availability of safe rides is worth more and I think people would pay more.
"It's actually a much better fit for a coop model." Too bad that coop model doesn't work. Previously I could not get a ride where I live, nor I could know which taxi is safe to take in Mexico City. The power is in the network.
posted by zeikka at 8:52 AM on December 9, 2018 [2 favorites]
I don't think the drivers will be under-qualified. Just desperate.
posted by seanmpuckett at 8:53 AM on December 9, 2018 [2 favorites]
posted by seanmpuckett at 8:53 AM on December 9, 2018 [2 favorites]
zeikka: The power is in the network.
Nah. The power is in the billions of dollars in subsidies provided by optimistic investors.
posted by clawsoon at 8:59 AM on December 9, 2018 [4 favorites]
Nah. The power is in the billions of dollars in subsidies provided by optimistic investors.
posted by clawsoon at 8:59 AM on December 9, 2018 [4 favorites]
The universal availability of safe rides is worth more and I think people would pay more.Do you really think it’s worth more than double the current rates? That’s how much it will cost just to break even, higher if anyone wants a return on their investment.
If yes, do you think nobody else will come in at a lower rate since they didn’t take on those extra costs?
Both of those answers have to be yes for the winner in this market to be Uber.
posted by adamsc at 9:04 AM on December 9, 2018 [3 favorites]
They have no option for being profitable other than raising prices other than a Hail Mary gamble that self-driving car technology will become so cheap that they can capture the drivers’ part and they’ll be so popular that competitors won’t push prices down
And, after the Waymo lawsuit, they are doubly fucked in that even if self-driving cars become a thing, they will not be a thing for uber, because uber doesn’t have the tech.
Not to mention no one seems to be using the Waymo service in Arizona? As seanmpuckett said upthread, perhaps subsidizing the least efficient mode of transportation was not the way to go? Especially when fewer and fewer people can afford to hire a car whenever they need to get around.
That, plus if I had to pick a way to kill the model self-driving cars in its cradle, “have Google launch the service first” would be on the list.
posted by schadenfrau at 9:04 AM on December 9, 2018 [7 favorites]
And, after the Waymo lawsuit, they are doubly fucked in that even if self-driving cars become a thing, they will not be a thing for uber, because uber doesn’t have the tech.
Not to mention no one seems to be using the Waymo service in Arizona? As seanmpuckett said upthread, perhaps subsidizing the least efficient mode of transportation was not the way to go? Especially when fewer and fewer people can afford to hire a car whenever they need to get around.
That, plus if I had to pick a way to kill the model self-driving cars in its cradle, “have Google launch the service first” would be on the list.
posted by schadenfrau at 9:04 AM on December 9, 2018 [7 favorites]
If you look at the lineup of big money investors who’ve sunk billions into Uber, those are the people in the room at the top of the mountain making the big billion dollar decisions every day and surely they must know something about Uber’s prospects the rest of us don’t. Don’t they?
The average UHNW investment outcomes are roughly the same as the average outcomes for the entire investing population.
posted by JPD at 9:16 AM on December 9, 2018 [6 favorites]
The average UHNW investment outcomes are roughly the same as the average outcomes for the entire investing population.
posted by JPD at 9:16 AM on December 9, 2018 [6 favorites]
"Do you really think it’s worth more than double the current rates? That’s how much it will cost just to break even, higher if anyone wants a return on their investment." Close to that -- taxi home from the airport costs ~$75, Lyft from home to airport costs ~$45 [taxis not available]. I think Lyft should cost closer to the taxi price; also the minimum for very short trips should be higher.
I always take ride sharing over taxis. In Boston cabs have defrauded me (by taking detours), gotten into accidents due to aggressive driving, refused rides, gotten angry because of an undesirable destination, cursed, smelled, etc. Worst thing ever while ride sharing was driver taking a wrong turn accidentally and having to get to the next exit to turn around. Licensing/ medallion system doesn't really work in regards to safety; rating system on ride sharing has its own problems as anything less than 5 starts threatening drivers livelihood, but still better than taxi system.
posted by zeikka at 9:22 AM on December 9, 2018 [5 favorites]
I always take ride sharing over taxis. In Boston cabs have defrauded me (by taking detours), gotten into accidents due to aggressive driving, refused rides, gotten angry because of an undesirable destination, cursed, smelled, etc. Worst thing ever while ride sharing was driver taking a wrong turn accidentally and having to get to the next exit to turn around. Licensing/ medallion system doesn't really work in regards to safety; rating system on ride sharing has its own problems as anything less than 5 starts threatening drivers livelihood, but still better than taxi system.
posted by zeikka at 9:22 AM on December 9, 2018 [5 favorites]
Uber launches buses in Cairo, Egypt
Uber moots the idea of minibuses in Nairobi, Kenya
Uber lets you call a motorcycle in Uganda
Uber lets you call a three wheeler in Sri Lanka
Uber lets you call a truck to send cargo
Uber picks up food for you in South Africa
Oh, and maybe Uber sends over a car in Lagos
posted by infini at 9:25 AM on December 9, 2018 [10 favorites]
Uber moots the idea of minibuses in Nairobi, Kenya
Uber lets you call a motorcycle in Uganda
Uber lets you call a three wheeler in Sri Lanka
Uber lets you call a truck to send cargo
Uber picks up food for you in South Africa
Oh, and maybe Uber sends over a car in Lagos
posted by infini at 9:25 AM on December 9, 2018 [10 favorites]
Now that i look at all those dots, maybe uber is actually funded by the survellance capitalism guys and just wants to capture the movements of the entire world, money no object?
posted by infini at 9:26 AM on December 9, 2018 [15 favorites]
posted by infini at 9:26 AM on December 9, 2018 [15 favorites]
Uber's pressure on Taxi Medallions was a significant part of Michael Cohen's financial issues
It's also contributed to multiple driver suicides, so maybe gloat slightly less.
posted by praemunire at 9:54 AM on December 9, 2018 [2 favorites]
It's also contributed to multiple driver suicides, so maybe gloat slightly less.
posted by praemunire at 9:54 AM on December 9, 2018 [2 favorites]
That sounds like a sizable gap once the VCs get tired of subsidizing rides: how many people are going to pay more than a cab, especially enough so to provide the kind of returns which investors want to justify the risk? The app is convenient if you’re not at someplace like an airport but most taxi companies have those these days, too, and most people vote with their wallets.Do you really think it’s worth more than double the current rates? That’s how much it will cost just to break even, higher if anyone wants a return on their investment."Close to that -- taxi home from the airport costs ~$75, Lyft from home to airport costs ~$45 [taxis not available].
posted by adamsc at 10:02 AM on December 9, 2018 [1 favorite]
Now that i look at all those dots, maybe uber is actually funded by the survellance capitalism guys and just wants to capture the movements of the entire world, money no object?
I wasn't necessarily thinking surveillance capitalism, but something more along the lines of Silicon Valley libertarians experimenting with abolishing all local transportation regulations. A lot of the money that Uber seems to attract doesn't have anything to do with the substance of its business model, but more because of the VC investors' affinity with the whole Ayn Rand/Nietzsche trip the company represents. After all, why do you think they call it Uber?
posted by jonp72 at 10:09 AM on December 9, 2018 [7 favorites]
I wasn't necessarily thinking surveillance capitalism, but something more along the lines of Silicon Valley libertarians experimenting with abolishing all local transportation regulations. A lot of the money that Uber seems to attract doesn't have anything to do with the substance of its business model, but more because of the VC investors' affinity with the whole Ayn Rand/Nietzsche trip the company represents. After all, why do you think they call it Uber?
posted by jonp72 at 10:09 AM on December 9, 2018 [7 favorites]
Metafilter: Something is rotten. This isn't okay. We aren't okay.
posted by Homo neanderthalensis at 10:19 AM on December 9, 2018 [6 favorites]
posted by Homo neanderthalensis at 10:19 AM on December 9, 2018 [6 favorites]
I don't have a thesis that explains how or if these two things are related, but they both make my gut twist with anxeity when I think about. Something is rotten. This isn't okay. We aren't okay.
Late stage capitalism is when there are no more frontiers to exploit so they begin to eat each other and becone ever more abstract.
posted by The Whelk at 11:48 AM on December 9, 2018 [6 favorites]
How is Ride Austin doing?
I'm a pretty infrequent rideshare user, but if I'm in town I always use Ride Austin in preference to other apps, and my experience is more or less identical to the way it goes when I use Lyft or Uber when I'm out of town. (And my drivers often display all the apps in the window, too.)
Generally, drivers tell me that they get more out of Ride Austin than other apps, so it's likely to stay reasonably popular among drivers and I can just about always get where I need to. That makes it sustainable for the odd consumer like myself to make it worth continuing to use. I don't know whether Ride Austin is so popular among consumers, and I'm not sure whether it would be a sustainable choice for any driver to use only Ride Austin to secure customers. Which is fine: my sense is that absolutely none of them rely on single apps to acquire rides.
That said, when the Texas Lege forced Austin to relax its safety regulations for rideshare drivers in 2017 and Uber and Lyft returned, apparently Ride Austin saw a huge hit to the userbase. It hasn't turned a profit either, complains that article: an odd choice for describing a nonprofit. It has, however, outlasted basically all of the other little rideshare groups that sprang up like mushrooms after rain when Lyft and Uber stomped out of the city in a giant fit. I think it will stay a niche product as long as Lyft and Uber are pouring money into advertising, etc., but that if either of those companies start to struggle it will gain ground again.
posted by sciatrix at 11:51 AM on December 9, 2018 [3 favorites]
I'm a pretty infrequent rideshare user, but if I'm in town I always use Ride Austin in preference to other apps, and my experience is more or less identical to the way it goes when I use Lyft or Uber when I'm out of town. (And my drivers often display all the apps in the window, too.)
Generally, drivers tell me that they get more out of Ride Austin than other apps, so it's likely to stay reasonably popular among drivers and I can just about always get where I need to. That makes it sustainable for the odd consumer like myself to make it worth continuing to use. I don't know whether Ride Austin is so popular among consumers, and I'm not sure whether it would be a sustainable choice for any driver to use only Ride Austin to secure customers. Which is fine: my sense is that absolutely none of them rely on single apps to acquire rides.
That said, when the Texas Lege forced Austin to relax its safety regulations for rideshare drivers in 2017 and Uber and Lyft returned, apparently Ride Austin saw a huge hit to the userbase. It hasn't turned a profit either, complains that article: an odd choice for describing a nonprofit. It has, however, outlasted basically all of the other little rideshare groups that sprang up like mushrooms after rain when Lyft and Uber stomped out of the city in a giant fit. I think it will stay a niche product as long as Lyft and Uber are pouring money into advertising, etc., but that if either of those companies start to struggle it will gain ground again.
posted by sciatrix at 11:51 AM on December 9, 2018 [3 favorites]
Uber had the good fortune of starting at the depths of the world recession in 2009. This provided lots of desperate people willing to drive for low or no wages after expenses. As the economy improved and real jobs become available, Uber is now finding it harder to get people to work for no health insurance, no unemployment insurance, no disability insurance, no retirement plan, no holiday pay, no sick pay, no vacation pay, while carrying all the financial risks themselves. To compete with real jobs, they are going to have to pay higher rates to drivers and either eat the increased costs or pass them on to their customers.
The best thing that could happen for Uber would be another recession and more desperate drivers.
posted by JackFlash at 12:10 PM on December 9, 2018 [3 favorites]
The best thing that could happen for Uber would be another recession and more desperate drivers.
posted by JackFlash at 12:10 PM on December 9, 2018 [3 favorites]
I doubt know if drivers are technically allowed to do that but I don't think anyone is trying too hard to stop them. The thing about having no loyalty to your "independent contractors" is that they have no incentive to be at all loyal to you.
Uber etc can't have any rules against drivers also working for lyft because that could tip them over into being officially "employees" instead of contractors, and then Uber would die.
posted by the agents of KAOS at 12:45 PM on December 9, 2018 [2 favorites]
Uber etc can't have any rules against drivers also working for lyft because that could tip them over into being officially "employees" instead of contractors, and then Uber would die.
posted by the agents of KAOS at 12:45 PM on December 9, 2018 [2 favorites]
Uber etc can't have any rules against drivers also working for lyft because that could tip them over into being officially "employees" instead of contractors, and then Uber would die.
But they can make is harder to work for both. For example, if you try to run both apps at the same time and put Uber in background, Uber will automatically sign you out after a couple of minutes.
This pseudo-contractor bullshit needs to be shut down by law. Employees deserve employee rights.
posted by JackFlash at 12:56 PM on December 9, 2018 [11 favorites]
But they can make is harder to work for both. For example, if you try to run both apps at the same time and put Uber in background, Uber will automatically sign you out after a couple of minutes.
This pseudo-contractor bullshit needs to be shut down by law. Employees deserve employee rights.
posted by JackFlash at 12:56 PM on December 9, 2018 [11 favorites]
I know the old monopoly laws are pretty much toast, but how is it legal to come in to a market and fuck the regulated competition using borrowed money?
It isn't, but one thing that Silicon Valley has been ramming down the throat of society is that regulations are bad. The result is that we have a populace that is now ready to go tear regulations down.
posted by NoxAeternum at 1:10 PM on December 9, 2018 [1 favorite]
It isn't, but one thing that Silicon Valley has been ramming down the throat of society is that regulations are bad. The result is that we have a populace that is now ready to go tear regulations down.
posted by NoxAeternum at 1:10 PM on December 9, 2018 [1 favorite]
sciatrix: It hasn't turned a profit either, complains that article: an odd choice for describing a nonprofit.
Nonprofits are allowed to turn a profit. If they don't receive any subsidies or donations, turning a profit (or at least not posting a loss) is a requirement if they are to survive.
posted by clawsoon at 1:11 PM on December 9, 2018
Nonprofits are allowed to turn a profit. If they don't receive any subsidies or donations, turning a profit (or at least not posting a loss) is a requirement if they are to survive.
posted by clawsoon at 1:11 PM on December 9, 2018
I don't tend to think of Uber as a normal independent business venture where investors are trying to get a return by running a profitable business.
I think of it more as an accelerationist project meant to completely destroy the few rights workers have left in America.
So the fact that really rich people are taking such an obvious loss on it makes more sense.
posted by srboisvert at 1:42 PM on December 9, 2018 [12 favorites]
I think of it more as an accelerationist project meant to completely destroy the few rights workers have left in America.
So the fact that really rich people are taking such an obvious loss on it makes more sense.
posted by srboisvert at 1:42 PM on December 9, 2018 [12 favorites]
Which only works because Uber is subsidizing the whole thing.
If you believe they aren't making money in mature markets where they rarely discount fares, I've got a bridge to sell you. What they're doing wrong, from a purely financial standpoint, is expanding into markets where they stand zero chance of having decent ride volume without significant discounting.
Unless their backend systems are incredibly bad, there's no way they're losing money in my city. Drivers aren't getting paid fairly (before tips, anyway) for the most part, but the company by rights should be making a fortune since they're charging rack rate on over 90% of trips and have plenty of margin from the spread between what they charge and what they pay.
Expansion costs them dearly. The subsidized leases cost them dearly. Their basic service, at least in large cities, should be cash flow positive on its own.
They're still a shitty company with particularly sociopathic management, but the basic concept is a money factory. If they fuck it up, it's their own incompetence at work.
posted by wierdo at 3:59 PM on December 9, 2018 [2 favorites]
If you believe they aren't making money in mature markets where they rarely discount fares, I've got a bridge to sell you. What they're doing wrong, from a purely financial standpoint, is expanding into markets where they stand zero chance of having decent ride volume without significant discounting.
Unless their backend systems are incredibly bad, there's no way they're losing money in my city. Drivers aren't getting paid fairly (before tips, anyway) for the most part, but the company by rights should be making a fortune since they're charging rack rate on over 90% of trips and have plenty of margin from the spread between what they charge and what they pay.
Expansion costs them dearly. The subsidized leases cost them dearly. Their basic service, at least in large cities, should be cash flow positive on its own.
They're still a shitty company with particularly sociopathic management, but the basic concept is a money factory. If they fuck it up, it's their own incompetence at work.
posted by wierdo at 3:59 PM on December 9, 2018 [2 favorites]
It isn't, but one thing that Silicon Valley has been ramming down the throat of society is that regulations are bad. The result is that we have a populace that is now ready to go tear regulations down.
Regulations aren't bad, except when they are. That we have a populace ready and willing to tear down taxi regulations is a good thing, and a credit to the intelligence of the populace. Or are you prepared to defend the medallion cartel system over the Uber-styled alternatives? Is it really beyond possibility that regulations can be dumb and counterproductive, tailor-made to benefit a few to the detriment to everyone else?
The medallion system deserves to go down. But there was no political will to deal with it, and nobody with deep enough pockets to tackle it Uber-style. Until the likes of Uber.
To be clear, I have no particular fondness for Uber, and if it were to fold tomorrow, I wouldn't be any more inclined to shed a tear than I would any other failing business venture. But the hand wringing/lip smacking over the death of Uber feels like concern tolling red meat for MetaFilter, with the usual dash of classism against those ignorant suffering drivers who just don't know any better, and conspiracy of the elites who are destroying worker protections.
posted by 2N2222 at 4:35 PM on December 9, 2018 [5 favorites]
Regulations aren't bad, except when they are. That we have a populace ready and willing to tear down taxi regulations is a good thing, and a credit to the intelligence of the populace. Or are you prepared to defend the medallion cartel system over the Uber-styled alternatives? Is it really beyond possibility that regulations can be dumb and counterproductive, tailor-made to benefit a few to the detriment to everyone else?
The medallion system deserves to go down. But there was no political will to deal with it, and nobody with deep enough pockets to tackle it Uber-style. Until the likes of Uber.
To be clear, I have no particular fondness for Uber, and if it were to fold tomorrow, I wouldn't be any more inclined to shed a tear than I would any other failing business venture. But the hand wringing/lip smacking over the death of Uber feels like concern tolling red meat for MetaFilter, with the usual dash of classism against those ignorant suffering drivers who just don't know any better, and conspiracy of the elites who are destroying worker protections.
posted by 2N2222 at 4:35 PM on December 9, 2018 [5 favorites]
Note that Lyft filed for IPO last week, and Uber just followed suit a day later. Hence the heightened discussion about unicorn valuations.
Even if they walk that filing back, Uber is going to be consistently compared against a competitor that is publicly traded. Who will probably be using their funds to launch, promote and undercut them in major markets. The only way I see to avoid this would be Uber using the cash to buy out Lyft.
posted by pwnguin at 4:40 PM on December 9, 2018
Even if they walk that filing back, Uber is going to be consistently compared against a competitor that is publicly traded. Who will probably be using their funds to launch, promote and undercut them in major markets. The only way I see to avoid this would be Uber using the cash to buy out Lyft.
posted by pwnguin at 4:40 PM on December 9, 2018
The thing is that a medallion scheme of some sort does serve an important public interest in our largest cities. Granted, regulatory capture coopted the process and kept the number of licenses low to benefit existing licensees. Large cities do need some limits, however. Excessive numbers of taxis, livery cars, etc, clogs up the streets with people driving around waiting for fares.
The answer is not throwing out all regulation, the answer is to fix the process. To the extent the Ubers and Lyfts of the world have encouraged that, we should be thankful. They've also been responsible for quite a lot of unpleasantness, however.
posted by wierdo at 4:43 PM on December 9, 2018 [5 favorites]
The answer is not throwing out all regulation, the answer is to fix the process. To the extent the Ubers and Lyfts of the world have encouraged that, we should be thankful. They've also been responsible for quite a lot of unpleasantness, however.
posted by wierdo at 4:43 PM on December 9, 2018 [5 favorites]
Well, at least we can say that Uber will have saved Lance Armstrong from a life of being merely wealthy.
posted by klanawa at 5:33 PM on December 9, 2018
posted by klanawa at 5:33 PM on December 9, 2018
The thing is that a medallion scheme of some sort does serve an important public interest in our largest cities. Granted, regulatory capture coopted the process and kept the number of licenses low to benefit existing licensees. Large cities do need some limits, however. Excessive numbers of taxis, livery cars, etc, clogs up the streets with people driving around waiting for fares.
But as implemented, these systems are often far worse than Uber. In Hong Kong, the medallions are so expensive that they are out of the reach for individuals. The banks trade in medallion investments like commodities and taxi drivers rent fractions of time at ruinous rates. People who oppose Uber would do much better to acknowledge the realities of current awful medallion systems.
posted by frumiousb at 6:15 PM on December 9, 2018 [4 favorites]
But as implemented, these systems are often far worse than Uber. In Hong Kong, the medallions are so expensive that they are out of the reach for individuals. The banks trade in medallion investments like commodities and taxi drivers rent fractions of time at ruinous rates. People who oppose Uber would do much better to acknowledge the realities of current awful medallion systems.
posted by frumiousb at 6:15 PM on December 9, 2018 [4 favorites]
As you imply there is a lot of middle ground between 100% regulatory capture of the present medallion system in a lot of areas and mono or cartel regulatory free for all that Uber is advocating.
Here's just one (there are many others) proposed system that could undoubtedly be improved upon as people figure out how to game it:
Here's just one (there are many others) proposed system that could undoubtedly be improved upon as people figure out how to game it:
- Medallions are treated more like a combination licence and guild membership.
- New medallions are awarded by lottery. One could restrict applicants to enforce things like gender parity. Or proportional racial representation.
- Any single person can only hold a single medallion (real people only, no corporations)
- There would be no advantage to holding multiple medallions anyways because only the person who owns a medallion can drive a cab
- Medallions can only be transferred to a relative and must be done so as a gift. This might result in adult adoptions (similar to a process in Japan for family corporations) *shrug*
- Physical cabs would probably end up being a mix of rentals from assorted corporate pools and personal or co-op medallion holders. But because the barrier to entry to physically owning a cab would be low it would be hard for capital owners to exploit the medallion holders.
- Medallions can be revoked or suspended for infractions or felonies.
- Obviously you'd want some sort of enforcement mechanism to ensure the owner driver thing.
If you believe they aren't making money in mature markets where they rarely discount fares, I've got a bridge to sell you.
It's not clear why they would be. Perhaps, due to name recognition and app 'stickiness' (people really hate installing new apps on their phones, almost irrationally so) they can charge a bit more than Lyft or the next clone that pops up in a particular city (and a quick peek shows that they do, in the DC area, right at this moment), but there's no sustainable advantage there. If Uber consistently charges significantly more than some other app-based rideshare service—e.g. Lyft, Curb—why would I continue to use Uber?
On the supply side, which is drivers, they ideally want to drive down compensation in order to take more profits. But if they do that, drivers will leave for a different app/platform. So they can't extract some large margin there, without creating an identical opportunity for somebody else to spin up a clone service.
What Uber is selling is a nearly-fungible commodity—getting somebody to come pick me up in their car and drive me somewhere. The path to compete with them is very clear, because it's exactly what they did to begin with: pick some vulnerable markets and start there, doing local advertising, and then slowly expand. There are already a bunch of Uber/Lyft clones in major US cities, basically nipping at their heels if they try to either raise prices for riders (in which case they'll peel off riders) or lower driver compensation (in which case they'll peel off drivers).
I just don't see the potential for big profits. It's a ride-hailing app. Everything else—including the possibility of scaling via self-driving cars—is VC-baiting fluff; it's the "???" part of the Underpants Gnomes business plan. Honestly, as far as I can see the only real advantage they have is the uncanny ability to talk very rich investors out of their money, and then funnel that money to drivers and consumers. Functionally, that's what Uber has been doing for years: it's a significant, albeit unintentional, subsidization of last-mile transportation, paid for by greedy rich folks with more money than sense.
Don't get me wrong, I'm not really against Uber, and credit where it's due: I think in beating the living snot out of the shitty, regulatory-capturing cab companies, they "unstuck" the market. There's no reason why someone shouldn't have been able to put together a national taxi network years ago, and then throw a 1-800 number in front of a central dispatch service, impose some uniform quality control, and basically make the whole thing less unpleasant to use, long before "apps" were even a thing. But it never happened, largely because of the regulatory sclerosis that incumbent cab companies had produced through lobbying and other forms of corruption. Uber broke that up, and deserves some credit for it, even though their reasons for doing so were probably more jealousy than righteousness.
But now that they blasted open the logjam that was preventing new entrants from getting into the transportation market, there's no reason to believe that they're immune to market pressures. Brand loyalty is only going to carry them so far.
posted by Kadin2048 at 6:53 PM on December 9, 2018 [2 favorites]
It's not clear why they would be. Perhaps, due to name recognition and app 'stickiness' (people really hate installing new apps on their phones, almost irrationally so) they can charge a bit more than Lyft or the next clone that pops up in a particular city (and a quick peek shows that they do, in the DC area, right at this moment), but there's no sustainable advantage there. If Uber consistently charges significantly more than some other app-based rideshare service—e.g. Lyft, Curb—why would I continue to use Uber?
On the supply side, which is drivers, they ideally want to drive down compensation in order to take more profits. But if they do that, drivers will leave for a different app/platform. So they can't extract some large margin there, without creating an identical opportunity for somebody else to spin up a clone service.
What Uber is selling is a nearly-fungible commodity—getting somebody to come pick me up in their car and drive me somewhere. The path to compete with them is very clear, because it's exactly what they did to begin with: pick some vulnerable markets and start there, doing local advertising, and then slowly expand. There are already a bunch of Uber/Lyft clones in major US cities, basically nipping at their heels if they try to either raise prices for riders (in which case they'll peel off riders) or lower driver compensation (in which case they'll peel off drivers).
I just don't see the potential for big profits. It's a ride-hailing app. Everything else—including the possibility of scaling via self-driving cars—is VC-baiting fluff; it's the "???" part of the Underpants Gnomes business plan. Honestly, as far as I can see the only real advantage they have is the uncanny ability to talk very rich investors out of their money, and then funnel that money to drivers and consumers. Functionally, that's what Uber has been doing for years: it's a significant, albeit unintentional, subsidization of last-mile transportation, paid for by greedy rich folks with more money than sense.
Don't get me wrong, I'm not really against Uber, and credit where it's due: I think in beating the living snot out of the shitty, regulatory-capturing cab companies, they "unstuck" the market. There's no reason why someone shouldn't have been able to put together a national taxi network years ago, and then throw a 1-800 number in front of a central dispatch service, impose some uniform quality control, and basically make the whole thing less unpleasant to use, long before "apps" were even a thing. But it never happened, largely because of the regulatory sclerosis that incumbent cab companies had produced through lobbying and other forms of corruption. Uber broke that up, and deserves some credit for it, even though their reasons for doing so were probably more jealousy than righteousness.
But now that they blasted open the logjam that was preventing new entrants from getting into the transportation market, there's no reason to believe that they're immune to market pressures. Brand loyalty is only going to carry them so far.
posted by Kadin2048 at 6:53 PM on December 9, 2018 [2 favorites]
The medallion system helped to enforce practical limits. It’s better for everyone to avoid an oversaturated cloud of cab drivers taking up street space waiting for fares to materialize. Medallions are a supply-control solution from before mass availability of GPS and smartphones.
Cities are waking up to their new data and network regulatory powers, so I expect that we’re going to see fully active and network-aware future laws. Look to the emerging landscape of city responses to new mobility devices like electric scooters (self-link blog post from my previous company) for hints on where a future medallion system could go: continuous fleet updates, dynamic caps, and open data standards like GBFS and MDS enforced by city departments of transportation. LADOT is leading the way and plenty of cities are on the same path. All these regulations are being applied to bike-like devices but the applicability to cars is obvious. New regulations with data sharing requirements will keep the regulatory benefits of medallions while avoiding their crummy rent-seeking drawbacks.
In the end Uber will just be a bump on this particular road because we’re not going back to a pre-GPS or pre-network time and it’s now really easy to duplicate the functionality of a ride-hail app while requiring city visibility into operations.
posted by migurski at 7:10 PM on December 9, 2018 [5 favorites]
Cities are waking up to their new data and network regulatory powers, so I expect that we’re going to see fully active and network-aware future laws. Look to the emerging landscape of city responses to new mobility devices like electric scooters (self-link blog post from my previous company) for hints on where a future medallion system could go: continuous fleet updates, dynamic caps, and open data standards like GBFS and MDS enforced by city departments of transportation. LADOT is leading the way and plenty of cities are on the same path. All these regulations are being applied to bike-like devices but the applicability to cars is obvious. New regulations with data sharing requirements will keep the regulatory benefits of medallions while avoiding their crummy rent-seeking drawbacks.
In the end Uber will just be a bump on this particular road because we’re not going back to a pre-GPS or pre-network time and it’s now really easy to duplicate the functionality of a ride-hail app while requiring city visibility into operations.
posted by migurski at 7:10 PM on December 9, 2018 [5 favorites]
Medallions are treated more like a combination licence and guild membership.
I totally get the need to regulate the number of cabs, but resellable medallions in particular always struck me as a slightly-bonkers way to achieve that. Fun for Microeconomics students—since the value is basically the NPV of the infinite-horizon income stream of a taxi cab—but crazy for the rest of us. Maybe it made sense in the 19th century when it was introduced, because a transferrable physical thing (the literal metal medallion) was easier to authenticate than entries in a central database somewhere, before radio and telephones. But why a city would want a system like that today I can't fathom. Why should taxi drivers also be speculative commodity investors?
Here's a better idea: just do a set number of professional licenses and auction the damn things off every year. They last one year (or two, or five, or whatever), aren't transferrable except by changing the ownership of the company it's awarded to (though I'd be open to the idea of linking them inextricably to real people, non-transferably, though perhaps with an opportunity to surrender the license for a pro-rated refund so people aren't trapped in the business), and the profits from the auction are revenue to the municipality tasked with enforcing the system. That way, the public is getting the benefit of the value of the regulatory system, or at least partially offsetting its costs, rather than giving it away to participants in the secondary market.
There are lots of other places where the government manages access to rival goods this way, and it works... if not great, at least well enough that there are other, bigger flaws to fix. E.g. the FCC's management of EM spectrum. Can you imagine how much worse that would be, if they had just sold "spectrum medallions" in 1930 and let people trade them around on a secondary market? At least a licensing system ensures the public gets the financial benefit to offset the operation of the regulatory/enforcement apparatus, and it gives the public an opportunity, as licenses expire and are renewed, to change how they are distributed.
In the long run that's how I think things are going to shake out: the medallion systems will slowly fade and be replaced with "TNC" licenses on a renewable basis. TNC licenses are already required in many big markets (along with some pretty suspiciously punitive taxes—$100k ante and 4% gross? what the fuck, New York) so we're already most of the way there.
posted by Kadin2048 at 7:14 PM on December 9, 2018 [4 favorites]
I totally get the need to regulate the number of cabs, but resellable medallions in particular always struck me as a slightly-bonkers way to achieve that. Fun for Microeconomics students—since the value is basically the NPV of the infinite-horizon income stream of a taxi cab—but crazy for the rest of us. Maybe it made sense in the 19th century when it was introduced, because a transferrable physical thing (the literal metal medallion) was easier to authenticate than entries in a central database somewhere, before radio and telephones. But why a city would want a system like that today I can't fathom. Why should taxi drivers also be speculative commodity investors?
Here's a better idea: just do a set number of professional licenses and auction the damn things off every year. They last one year (or two, or five, or whatever), aren't transferrable except by changing the ownership of the company it's awarded to (though I'd be open to the idea of linking them inextricably to real people, non-transferably, though perhaps with an opportunity to surrender the license for a pro-rated refund so people aren't trapped in the business), and the profits from the auction are revenue to the municipality tasked with enforcing the system. That way, the public is getting the benefit of the value of the regulatory system, or at least partially offsetting its costs, rather than giving it away to participants in the secondary market.
There are lots of other places where the government manages access to rival goods this way, and it works... if not great, at least well enough that there are other, bigger flaws to fix. E.g. the FCC's management of EM spectrum. Can you imagine how much worse that would be, if they had just sold "spectrum medallions" in 1930 and let people trade them around on a secondary market? At least a licensing system ensures the public gets the financial benefit to offset the operation of the regulatory/enforcement apparatus, and it gives the public an opportunity, as licenses expire and are renewed, to change how they are distributed.
In the long run that's how I think things are going to shake out: the medallion systems will slowly fade and be replaced with "TNC" licenses on a renewable basis. TNC licenses are already required in many big markets (along with some pretty suspiciously punitive taxes—$100k ante and 4% gross? what the fuck, New York) so we're already most of the way there.
posted by Kadin2048 at 7:14 PM on December 9, 2018 [4 favorites]
. As the economy improved and real jobs become available,
Citation needed. Weren’t most of the new jobs created actually shittier jobs with less full on employee status?
posted by corb at 8:53 PM on December 9, 2018 [1 favorite]
Citation needed. Weren’t most of the new jobs created actually shittier jobs with less full on employee status?
posted by corb at 8:53 PM on December 9, 2018 [1 favorite]
Citation needed. Weren’t most of the new jobs created actually shittier jobs with less full on employee status?
Here is total employment. It is up by 16 million workers since the bottom of the recession.
And here you can see that full-time employment is sharply up and part-time employment is sharply down.
It's not all roses out there but perhaps you have forgotten just how dismal things were barely a decade ago. The situation has vastly improved and at the moment, with a tighter labor market, uneducated workers and many African Americans in particular have been the beneficiaries as they are drawn into the workforce.
posted by JackFlash at 9:34 PM on December 9, 2018 [2 favorites]
Here is total employment. It is up by 16 million workers since the bottom of the recession.
And here you can see that full-time employment is sharply up and part-time employment is sharply down.
It's not all roses out there but perhaps you have forgotten just how dismal things were barely a decade ago. The situation has vastly improved and at the moment, with a tighter labor market, uneducated workers and many African Americans in particular have been the beneficiaries as they are drawn into the workforce.
posted by JackFlash at 9:34 PM on December 9, 2018 [2 favorites]
the shitty, regulatory-capturing cab companies,
This kind of statement makes me want to smash my forehead against the floor, because...what do you think Uber is trying to do. Are you under the impression that they are actually in favor of a truly unregulated market. Or do you think they might possibly be striving to get the market regulated in their favor. If Uber survives, in five years or less they will be advocating "sensible regulations" whose main goal will be to exclude new entrants somehow.
I really don't understand this incredible blind spot so many people have towards corporate motivations, here in 2018. Corporations hate you. They are doing their absolute best to extract every last bit of value from you--your wallet and your life--they can possibly get away with. There is nothing kind, good, thoughtful, or wise about them. They are looting machines. Even if every single corporation does not conform universally to this analysis, enough of them always will that you cannot behave as if they will do anything else.
posted by praemunire at 9:53 PM on December 9, 2018 [23 favorites]
This kind of statement makes me want to smash my forehead against the floor, because...what do you think Uber is trying to do. Are you under the impression that they are actually in favor of a truly unregulated market. Or do you think they might possibly be striving to get the market regulated in their favor. If Uber survives, in five years or less they will be advocating "sensible regulations" whose main goal will be to exclude new entrants somehow.
I really don't understand this incredible blind spot so many people have towards corporate motivations, here in 2018. Corporations hate you. They are doing their absolute best to extract every last bit of value from you--your wallet and your life--they can possibly get away with. There is nothing kind, good, thoughtful, or wise about them. They are looting machines. Even if every single corporation does not conform universally to this analysis, enough of them always will that you cannot behave as if they will do anything else.
posted by praemunire at 9:53 PM on December 9, 2018 [23 favorites]
I'm certainly aware that Uber will probably try to protect itself with every dirty trick in the book, and as many new ones as they can come up with.
But I don't think that they will be nearly so successful at the national level, and at their size, as smaller cab companies were at the local/municipal or city level.
The most deplorable corruption and regulatory capture I've ever seen has largely been at the municipal and city levels. Typically by the time you get to the Federal level, and particularly when very large organizations are involved, there are enough eyes on to at least force a simulacrum of fair dealing.
So, yeah, you don't have to think that Uber (or Lyft or... whatever the new one is this week) is a charity to think that they might be an improvement from the status quo circa 2008. It's possible that they could be greedheads right out of the Gordon Gekko playbook and we could still end up ahead, because we were so far behind before.
posted by Kadin2048 at 10:30 PM on December 9, 2018 [4 favorites]
But I don't think that they will be nearly so successful at the national level, and at their size, as smaller cab companies were at the local/municipal or city level.
The most deplorable corruption and regulatory capture I've ever seen has largely been at the municipal and city levels. Typically by the time you get to the Federal level, and particularly when very large organizations are involved, there are enough eyes on to at least force a simulacrum of fair dealing.
So, yeah, you don't have to think that Uber (or Lyft or... whatever the new one is this week) is a charity to think that they might be an improvement from the status quo circa 2008. It's possible that they could be greedheads right out of the Gordon Gekko playbook and we could still end up ahead, because we were so far behind before.
posted by Kadin2048 at 10:30 PM on December 9, 2018 [4 favorites]
To avoid being bamboozled, it's important to realize that they aren't outright lying. The benefits they describe do in fact accrue to some drivers on rare occasion. Just like the benefits of "ride sharing" are real. And just as the vast majority of their business isn't actually ride sharing, the vast majority of their drivers don't benefit from the relationship in the way they describe to regulators, much less in their marketing wank.
Confusing the issues only benefits the bad actors.
There have certainly been means over the past few years for individuals to take advantage of the fountain of cash Uber and Lyft have been throwing at people. I, for one, am quite happy when our betters decide to blow billions of dollars giving money to the general public, should they bother to ask. While I'd rather it be used productively, widely distributed to the bottom half of income earners is a close second.
(Uber and Lyft have, among other things, been supporting the new car market quite substantially for some years until recently. And some wonder why we're suddenly seeing stories of doom and gloom from the Auto industry in general and lenders in particular)
posted by wierdo at 12:00 AM on December 10, 2018 [1 favorite]
Confusing the issues only benefits the bad actors.
There have certainly been means over the past few years for individuals to take advantage of the fountain of cash Uber and Lyft have been throwing at people. I, for one, am quite happy when our betters decide to blow billions of dollars giving money to the general public, should they bother to ask. While I'd rather it be used productively, widely distributed to the bottom half of income earners is a close second.
(Uber and Lyft have, among other things, been supporting the new car market quite substantially for some years until recently. And some wonder why we're suddenly seeing stories of doom and gloom from the Auto industry in general and lenders in particular)
posted by wierdo at 12:00 AM on December 10, 2018 [1 favorite]
After connecting those Uber for X dots across Africa, I've been working on a brief blogpost on the topic - regardless of whether they themselves live or die, they've inspired a whole new viable and feasible business model that has had impact on the informal economy. Today you can sit in Kigali, Rwanda and order groceries which are selected and purchased for you from different outlets and then delivered home. If you're a woman in rural Rwanda, you can use an app to order contraceptives and sanitary napkins discreetly. You can order a live goat in northern Nigeria or southern Angola. On demand service delivery was always available, what the apps are doing is collating customers and boosting discoverability for the informal economy service and goods providers. You don't have to sit in your corner waiting for a customer to show up if she can ping you on your phone.
Plus, the hundreds of competing apps in all cities where they're at as well as where they're not available because everyone wants it.
Ps. Watch Taxify from Estonia
posted by infini at 2:52 AM on December 10, 2018 [3 favorites]
Plus, the hundreds of competing apps in all cities where they're at as well as where they're not available because everyone wants it.
Ps. Watch Taxify from Estonia
posted by infini at 2:52 AM on December 10, 2018 [3 favorites]
But I don't think that they will be nearly so successful at the national level, and at their size, as smaller cab companies were at the local/municipal or city level.
Fortunately for them, they're not aiming at national legislation. We've been talking about Austin all thread, right? When municipal legislation passed a law requiring rideshare drivers to be fingerprinted in a way that threatened Uber (and Lyft) with the possibility of treating drivers like employees, and they spent over a million dollars trying to kill the city law via prop 1? I mean, they failed there, because of very widespread public discussion and education, and then they stomped out of town in a fit.
Do you know why we're discussing the effects of Uber in Austin today? Uber lobbied at the state level and had Austin's ability to set municipal laws like that one revoked. State level is an awful lot cheaper, especially when you can rally both the corporation lovers and the desire to "trigger the libs" all at once. Uber has no desire to aim for federal protections. It is already trying to modify the playing ground in its favor in a wide variety of markets, starting on the local level and moving on up.
Don't trust a fucking corporation to improve anything for the consumer or the employees, except by accident. And definitely don't trust industry to be stupid enough to start trying to buy legislation at the national level just because it operates at a national level.
posted by sciatrix at 6:26 AM on December 10, 2018 [9 favorites]
Fortunately for them, they're not aiming at national legislation. We've been talking about Austin all thread, right? When municipal legislation passed a law requiring rideshare drivers to be fingerprinted in a way that threatened Uber (and Lyft) with the possibility of treating drivers like employees, and they spent over a million dollars trying to kill the city law via prop 1? I mean, they failed there, because of very widespread public discussion and education, and then they stomped out of town in a fit.
Do you know why we're discussing the effects of Uber in Austin today? Uber lobbied at the state level and had Austin's ability to set municipal laws like that one revoked. State level is an awful lot cheaper, especially when you can rally both the corporation lovers and the desire to "trigger the libs" all at once. Uber has no desire to aim for federal protections. It is already trying to modify the playing ground in its favor in a wide variety of markets, starting on the local level and moving on up.
Don't trust a fucking corporation to improve anything for the consumer or the employees, except by accident. And definitely don't trust industry to be stupid enough to start trying to buy legislation at the national level just because it operates at a national level.
posted by sciatrix at 6:26 AM on December 10, 2018 [9 favorites]
What I don't get is, how is it not profitable? They don't own the cars, employ drivers etc They have an app that runs on AWS that acts as a service company admin/dispatcher. They spending it on gold ping pong tables?
posted by Damienmce at 7:04 AM on December 10, 2018
posted by Damienmce at 7:04 AM on December 10, 2018
I recently learned about something called Fomo3D, which is a gambling "game" based on crypto currency that is explicitly and openly structured so as to mimic an ICO scam. It is currently sucking up millions of dollars worth (if that phrase can even apply) of Ethereum. It's a scam, everyone knows it's a scam, the website literally says it's a scam, but people are lining up because hey, maybe you can take those other suckers to the cleaners.
So, basically, Cow Clicker for cryptocurrency scams?
posted by acb at 7:16 AM on December 10, 2018
So, basically, Cow Clicker for cryptocurrency scams?
posted by acb at 7:16 AM on December 10, 2018
Uber lobbied at the state level and had Austin's ability to set municipal laws like that one revoked.
Uber had nothing to do with the passage of that law. It was (mostly) Denton and Dallas, for anti-fracking and "sanctuary cities" respectively.
posted by The_Vegetables at 7:30 AM on December 10, 2018 [1 favorite]
Uber had nothing to do with the passage of that law. It was (mostly) Denton and Dallas, for anti-fracking and "sanctuary cities" respectively.
posted by The_Vegetables at 7:30 AM on December 10, 2018 [1 favorite]
Damienmce: They spending it on gold ping pong tables?
They're subsidizing rides.
Ride subsidies cost the company $2 billion in 2015. On average, the analysis suggests, Uber passengers paid only 41% of the cost of their trips.
Here is a breakdown of 2017 financials for the company. I'd be curious to see how those numbers compare (in terms of proportions) to your average local taxi company.
posted by clawsoon at 7:31 AM on December 10, 2018 [3 favorites]
They're subsidizing rides.
Ride subsidies cost the company $2 billion in 2015. On average, the analysis suggests, Uber passengers paid only 41% of the cost of their trips.
Here is a breakdown of 2017 financials for the company. I'd be curious to see how those numbers compare (in terms of proportions) to your average local taxi company.
posted by clawsoon at 7:31 AM on December 10, 2018 [3 favorites]
clawsoon beat me to it, but yeah they are basically paying out more to drivers than they have in revenue after operating costs. Or, put differently, they are taking less of a cut as they take money from you as a passenger and give it to the driver (since they want us to believe that they are just the middleman in this otherwise Randian individual-to-individual transaction eyeroll), than you'd think they would if they were truly profitable (or profit-maximizing in a noncompetitive scenario). They have to do this, because their insane growth projections requires them to try and dominate the entire market, not just exist. And the only way you can do that is by appealing—expensively—to drivers.
All the developers and self-driving-car R&D are probably going to fall by the wayside at some point, because I just don't think the potential for huge profits exists in the space. They're not going to build the "moat", and are always going to have other companies right behind them, competing on costs and on driver pay. So eventually they're going to need to cut costs to get profits, and that's when the fun stuff at Uber HQ (including the self-driving side projects) will probably end. How patient their investors are will determine how long that takes, and the patience of investors is probably linked pretty directly to interest rates. As long as interest rates stay low, people may be okay with playing the long game. If interest rates go up, I suspect things are going to get awkward.
Anyway, this seems like a bad way to run a business, but what the hell do I know. (Nobody is giving me billions of dollars just so I can spend it, so maybe the joke's on me.) And if their misplaced, big-swinging-dick desire to monopolize the transportation market rather than create a sustainable business means that I get cheap rides to the local bar, and the driver gets more money than she otherwise would, well... I'm pretty okay with that. It'll probably all end in tears, but there's little in 2018 that you can't say that about.
posted by Kadin2048 at 10:35 AM on December 10, 2018 [5 favorites]
All the developers and self-driving-car R&D are probably going to fall by the wayside at some point, because I just don't think the potential for huge profits exists in the space. They're not going to build the "moat", and are always going to have other companies right behind them, competing on costs and on driver pay. So eventually they're going to need to cut costs to get profits, and that's when the fun stuff at Uber HQ (including the self-driving side projects) will probably end. How patient their investors are will determine how long that takes, and the patience of investors is probably linked pretty directly to interest rates. As long as interest rates stay low, people may be okay with playing the long game. If interest rates go up, I suspect things are going to get awkward.
Anyway, this seems like a bad way to run a business, but what the hell do I know. (Nobody is giving me billions of dollars just so I can spend it, so maybe the joke's on me.) And if their misplaced, big-swinging-dick desire to monopolize the transportation market rather than create a sustainable business means that I get cheap rides to the local bar, and the driver gets more money than she otherwise would, well... I'm pretty okay with that. It'll probably all end in tears, but there's little in 2018 that you can't say that about.
posted by Kadin2048 at 10:35 AM on December 10, 2018 [5 favorites]
The thing is, Uber succeeded because in most places, big cities or mid sized, the taxi industry sucked and everyone hated it. Phone for a taxi, wait on hold for an ungodly time, be told the Taxi would be there in 10 minutes followed by a wait for an essentially random number of minutes, then pay a lot to get from A to B in a kind of crappy and often reeking of smoke car and then at the end there's a hassle paying.
From a user standpoint Uber is vastly better. You hit a button on the app, a ride shows up in usually less than 6 minutes, they already know where you want to go, the car is clean and doesn't reek of smoke, and when you get to your destination there's no fuss with payment.
The problem, of course, is that they're creating this by taking out the only thing that made the taxi industry even remotely tolerable: something approaching a decent wage and benefits package for the drivers. They're criminally underpaying their drivers, and passing that along to us consumers as a superior ride.
We get a great deal, the person driving for Uber, or Lyft, or whoever, gets poverty wages and their car disintegrating at such a rate that long before it's paid off Uber will give them the boot for having an insufficiently nice car.
A taxi company could easily do the convenience and quality of ride things that Uber has done, but it'd come at the expense of higher ride prices. Because the sad fact is, unless you're willing to accept economically exploiting the driver, taxi service physically can't be as low cost as Uber. And unless you're willing to accept higher ride prices then they're going to get some cheap cars and work them until they completely fall apart, because new cars cost money.
I've got a suspicion that Uber's actual, for real, long term plan is to stay in the business as the big name in ride sharing until they can either develop their own driving AI or lease one, and then hope they can leverage their name recognition into real profits after they get rid of all human drivers. And perhaps that's why some of the rich people continue to be willing to put money into a currently money losing operation: they see a light at the end of the tunnel in the form of brand recognition after human drivers are a thing of the past.
posted by sotonohito at 10:46 AM on December 10, 2018 [4 favorites]
From a user standpoint Uber is vastly better. You hit a button on the app, a ride shows up in usually less than 6 minutes, they already know where you want to go, the car is clean and doesn't reek of smoke, and when you get to your destination there's no fuss with payment.
The problem, of course, is that they're creating this by taking out the only thing that made the taxi industry even remotely tolerable: something approaching a decent wage and benefits package for the drivers. They're criminally underpaying their drivers, and passing that along to us consumers as a superior ride.
We get a great deal, the person driving for Uber, or Lyft, or whoever, gets poverty wages and their car disintegrating at such a rate that long before it's paid off Uber will give them the boot for having an insufficiently nice car.
A taxi company could easily do the convenience and quality of ride things that Uber has done, but it'd come at the expense of higher ride prices. Because the sad fact is, unless you're willing to accept economically exploiting the driver, taxi service physically can't be as low cost as Uber. And unless you're willing to accept higher ride prices then they're going to get some cheap cars and work them until they completely fall apart, because new cars cost money.
I've got a suspicion that Uber's actual, for real, long term plan is to stay in the business as the big name in ride sharing until they can either develop their own driving AI or lease one, and then hope they can leverage their name recognition into real profits after they get rid of all human drivers. And perhaps that's why some of the rich people continue to be willing to put money into a currently money losing operation: they see a light at the end of the tunnel in the form of brand recognition after human drivers are a thing of the past.
posted by sotonohito at 10:46 AM on December 10, 2018 [4 favorites]
Uber will become the aspirin of its brief lifespan.
posted by infini at 11:49 AM on December 10, 2018 [1 favorite]
posted by infini at 11:49 AM on December 10, 2018 [1 favorite]
The average UHNW investment outcomes are roughly the same as the average outcomes for the entire investing population.
For public equity markets, sure. They're still extracting a liquidity premium for stuff like private equity where the average investor can't participate.
posted by leotrotsky at 12:15 PM on December 10, 2018 [1 favorite]
For public equity markets, sure. They're still extracting a liquidity premium for stuff like private equity where the average investor can't participate.
posted by leotrotsky at 12:15 PM on December 10, 2018 [1 favorite]
These are not good times, but I have to say that I gain a certain amount of joy from Uber and Facebook's flaming death spirals.
posted by suetanvil at 12:17 PM on December 10, 2018 [4 favorites]
posted by suetanvil at 12:17 PM on December 10, 2018 [4 favorites]
For public equity markets, sure. They're still extracting a liquidity premium for stuff like private equity where the average investor can't participate.
Private equity returns are broadly public equity * leverage. VC returns are basically crap. Even Infra has mostly seen the liquidity premium priced out.
posted by JPD at 12:28 PM on December 10, 2018
Private equity returns are broadly public equity * leverage. VC returns are basically crap. Even Infra has mostly seen the liquidity premium priced out.
posted by JPD at 12:28 PM on December 10, 2018
I know it’s normal to some extent for businesses to run on credit but man, it’s always stark to see that a business in the red can just... continue running but if I personally get into the red I’ll be couch surfing.
If you were a medical student or a junior resident you would find a large number of people happy to lend you money. That's because they expect that soon you will be making a lot of money even if you aren't. Uber has essentially been pitching itself as a thing that will soon make a lot of money even if it doesn't right now (like a medical student or a tech company) when it is actually a company that is reaching saturation.
It also demonstrates how the stock market can prop up the value of a business just because it likes the idea of that business. Amazon benefits from precisely that phenomenon. It routinely loses enormous amounts of money on failed projects, and where most retailers with a billion-dollar quarterly loss would see a major correction in their stock value as a result, Wall Street just brushes it off because “Amazon is different”. It’s not different, it’s just that the stock market is running on voodoo and “gut feeling” just like these companies are.
I wonder about the rich fantasy life of the people who favourited this. Amazon had over three billion dollars in profit in 2017, up from two billion the year before. They're in a business with a massive built-in "moat" because of how much it would cost to duplicate their infrastructure.
I spent some time in Newport in Wales recently where the local taxi operator had their own app, I assume a white-labelled product that they pay a few thousand £ a year for. Obviously they need to get people to download it and in places with a lot of transient cab users that model won't work as well since people will already have uber on their phone but "installed on phone" is a very weak defence against competition.
posted by atrazine at 1:02 PM on December 10, 2018 [5 favorites]
If you were a medical student or a junior resident you would find a large number of people happy to lend you money. That's because they expect that soon you will be making a lot of money even if you aren't. Uber has essentially been pitching itself as a thing that will soon make a lot of money even if it doesn't right now (like a medical student or a tech company) when it is actually a company that is reaching saturation.
It also demonstrates how the stock market can prop up the value of a business just because it likes the idea of that business. Amazon benefits from precisely that phenomenon. It routinely loses enormous amounts of money on failed projects, and where most retailers with a billion-dollar quarterly loss would see a major correction in their stock value as a result, Wall Street just brushes it off because “Amazon is different”. It’s not different, it’s just that the stock market is running on voodoo and “gut feeling” just like these companies are.
I wonder about the rich fantasy life of the people who favourited this. Amazon had over three billion dollars in profit in 2017, up from two billion the year before. They're in a business with a massive built-in "moat" because of how much it would cost to duplicate their infrastructure.
I spent some time in Newport in Wales recently where the local taxi operator had their own app, I assume a white-labelled product that they pay a few thousand £ a year for. Obviously they need to get people to download it and in places with a lot of transient cab users that model won't work as well since people will already have uber on their phone but "installed on phone" is a very weak defence against competition.
posted by atrazine at 1:02 PM on December 10, 2018 [5 favorites]
I spent some time in Newport in Wales recently where the local taxi operator had their own app, I assume a white-labelled product that they pay a few thousand £ a year for. Obviously they need to get people to download it and in places with a lot of transient cab users that model won't work as well since people will already have uber on their phone but "installed on phone" is a very weak defence against competition.
Every startup ecosystem/hub/accelerator promotes their own homegrown version. Last week at Slush there was a new one on everyone's lips... sounded like Yougo but overhere that may be spelt Ygoo - new ones are also cheaper, and users know it i.e. incentives
posted by infini at 1:14 PM on December 10, 2018
Every startup ecosystem/hub/accelerator promotes their own homegrown version. Last week at Slush there was a new one on everyone's lips... sounded like Yougo but overhere that may be spelt Ygoo - new ones are also cheaper, and users know it i.e. incentives
posted by infini at 1:14 PM on December 10, 2018
The problem, of course, is that they're creating this by taking out the only thing that made the taxi industry even remotely tolerable: something approaching a decent wage and benefits package for the drivers. They're criminally underpaying their drivers, and passing that along to us consumers as a superior ride.
Just as a data point, this is not true everywhere by a long shot. In Hong Kong, a medallion goes for nearly a million US dollars and 40% (and riding rapidly) are owned by companies, not drivers. The idea that those companies pay fair wages to drivers is hilariously wrong. The companies oppose Uber because the drivers prefer often to work for Uber— better pay and working conditions. To survive as a taxi driver in Hong Kong, you need to work double shifts six days a week.
posted by frumiousb at 2:21 PM on December 10, 2018 [1 favorite]
Just as a data point, this is not true everywhere by a long shot. In Hong Kong, a medallion goes for nearly a million US dollars and 40% (and riding rapidly) are owned by companies, not drivers. The idea that those companies pay fair wages to drivers is hilariously wrong. The companies oppose Uber because the drivers prefer often to work for Uber— better pay and working conditions. To survive as a taxi driver in Hong Kong, you need to work double shifts six days a week.
posted by frumiousb at 2:21 PM on December 10, 2018 [1 favorite]
But the company just posted another quarter of jaw-dropping losses — this time over $1 billion, after $4.5 billion of losses in 2017.So what I hear you saying is, investors are looking for an opportunity to invest $24B in a company that loses $4B its first year and $1B its second year.
I smell funding, Amtrak!
posted by erikred at 3:03 PM on December 10, 2018 [1 favorite]
I do think Uber can take some credit for putting a crack in the "one adult - one car" mentality. It's helped open the door for allowing the construction of new buildings that don't have massive parking garages attached (or at least less massive). And that's something that will pay dividends to cities, and their residents, in the long run.
I don't doubt that the other shoe will drop at some point, and Uber will disappear, or at least become significantly more expensive. How will the transportation landscape change as a result? If there are more people living in denser environments, suddenly feeling the pinch of transportation costs, I feel like it might be a once-in-a-generation chance for cities to transition a lot of people to mass transit and other alternatives that are both environmentally and fiscally sound. It'll take leadership, investment, and competence. But I think there's a lot of upside.
posted by alexei at 3:29 PM on December 10, 2018 [2 favorites]
I don't doubt that the other shoe will drop at some point, and Uber will disappear, or at least become significantly more expensive. How will the transportation landscape change as a result? If there are more people living in denser environments, suddenly feeling the pinch of transportation costs, I feel like it might be a once-in-a-generation chance for cities to transition a lot of people to mass transit and other alternatives that are both environmentally and fiscally sound. It'll take leadership, investment, and competence. But I think there's a lot of upside.
posted by alexei at 3:29 PM on December 10, 2018 [2 favorites]
erikred: a company that loses $4B its first year and $1B its second year.
A minor correction that amplifies your point: The $4B is one year of losses, the $1B is one quarter of losses - i.e. it's on track to lose $4B again this year.
posted by clawsoon at 4:21 PM on December 10, 2018
A minor correction that amplifies your point: The $4B is one year of losses, the $1B is one quarter of losses - i.e. it's on track to lose $4B again this year.
posted by clawsoon at 4:21 PM on December 10, 2018
The thing is, Uber succeeded because in most places, big cities or mid sized, the taxi industry sucked and everyone hated it. Phone for a taxi, wait on hold for an ungodly time, be told the Taxi would be there in 10 minutes followed by a wait for an essentially random number of minutes, then pay a lot to get from A to B in a kind of crappy and often reeking of smoke car and then at the end there's a hassle paying.
I would also add that the taxi industry was and continues to be intensely racist, in ways that Uber/Lyft et.al. have drastically mitigated. I have no love for Uber as a company, but after moving to Chicago and making friends who grew up in Chatham and Austin and other predominantly Black south and west side neighborhoods, I really do think that people underrate how terribly taxi drivers have treated people who live or lived in those kinds of neighborhoods. Cabbies would not (and still frequently will not) take you to the destinations on the south side or west side of the city. They would and will drive past a Black man in a suit to pick up a white guy in sweats and a t-shirt.
Uber and Lyft drivers are subject to the same biases, but the apps give users ways to mitigate those biases: the people of color I know generally do not have an actual photo of themselves as their profile picture on ride-share, and if their name visibly scans as non-white, they usually use a nickname. These are not good solutions, but they're more options than what people had when the cabs were the only game in town. Anyone suggesting that we just regulate the rideshare companies into the dirt and go back to the old system needs to actually address the various ways the old system actively screwed over a lot of people.
posted by protocoach at 8:36 PM on December 10, 2018 [3 favorites]
I would also add that the taxi industry was and continues to be intensely racist, in ways that Uber/Lyft et.al. have drastically mitigated. I have no love for Uber as a company, but after moving to Chicago and making friends who grew up in Chatham and Austin and other predominantly Black south and west side neighborhoods, I really do think that people underrate how terribly taxi drivers have treated people who live or lived in those kinds of neighborhoods. Cabbies would not (and still frequently will not) take you to the destinations on the south side or west side of the city. They would and will drive past a Black man in a suit to pick up a white guy in sweats and a t-shirt.
Uber and Lyft drivers are subject to the same biases, but the apps give users ways to mitigate those biases: the people of color I know generally do not have an actual photo of themselves as their profile picture on ride-share, and if their name visibly scans as non-white, they usually use a nickname. These are not good solutions, but they're more options than what people had when the cabs were the only game in town. Anyone suggesting that we just regulate the rideshare companies into the dirt and go back to the old system needs to actually address the various ways the old system actively screwed over a lot of people.
posted by protocoach at 8:36 PM on December 10, 2018 [3 favorites]
I spent some time in Newport in Wales recently where the local taxi operator had their own app, I assume a white-labelled product that they pay a few thousand £ a year for.
The UK is full of small minicab companies with their own proprietary apps. Which means that, to take full advantage of market choice, one would need a screen full of apps, and a lot of time paging through them looking for the best option.
The sensible thing would be for there to be a standard API, offered by cab companies, with one app (or a choice of apps, at a variety of price points and feature sets) for navigating them, getting and presenting offers, and such. Though that sounds like 10-years-ago's utopian thinking; these days, the internet is about coercing users into high-walled proprietary silos, all the better to extract the maximum profit from them.
posted by acb at 2:22 AM on December 11, 2018 [1 favorite]
The UK is full of small minicab companies with their own proprietary apps. Which means that, to take full advantage of market choice, one would need a screen full of apps, and a lot of time paging through them looking for the best option.
The sensible thing would be for there to be a standard API, offered by cab companies, with one app (or a choice of apps, at a variety of price points and feature sets) for navigating them, getting and presenting offers, and such. Though that sounds like 10-years-ago's utopian thinking; these days, the internet is about coercing users into high-walled proprietary silos, all the better to extract the maximum profit from them.
posted by acb at 2:22 AM on December 11, 2018 [1 favorite]
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