5 ms·

The problem is not competition from traditional taxi companies (they do indeed replace taxi companies' management structure) but other ride sharing companies, i

by dasimon 10y ago

The problem is not competition from traditional taxi companies (they do indeed replace taxi companies' management structure) but other ride sharing companies, ie Lyft. Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses, the drivers themselves, while maintaining lower prices than Lyft. Without self-driving cars, that strategy isn't sustainable, and so eventually Uber will find itself unable to maintain its advantage over Lyft.

CPLX 10y ago
> Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses I think someone should pause to note that, if true, this is one of the dumbest long term business strategies in the history of high finance. This idea, apparently, is a bet on a technology that not only doesn't exist, but is extremely highly regulated, that the company has literally no demonstrated core competencies in, hasn't been even successfully prototyped, that represents the hardest most complex use case of the technology, and is obviously years away at best, but yet it justifies a policy of losing billions of dollars in the present just to get market share when the costs of switching brands are literally so non-existant that a typical customer often does it several times in a single evening out. Maybe it's my old age and having lived through the first dotcom crash, but it seems to me that even when you feel like the only person who sees that the underlying business logic is nonsensical magical thinking, it's still quite possible you're correct.
- tyingq 10y ago
  You aren't alone in that thought. Being privately held the financials are opaque enough that no outsider knows for sure how much of the spend is subsidizing the low prices, versus being used for expansion and R&D. The leaked data from Naked Capitalism is really the only data outsiders have at their disposal: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... The use of EBITAR (vs EBITDA) makes it difficult to draw real conclusions, though the fact that they use EBITAR at all is suggestive on its own.
- TuringNYC 10y ago
  However, something as epic as self-driving cars are one of those things that come once every two generations. SDCs, if achieved, have the potential to change the entire American way of life and massively disrupt society. Start-ups love to disrupt and this would be the mother of all disruptions. So, for that reason alone, I think firms are willing to bet a sliver of their portfolio. If I was a family office I certainly would do so.
  - CPLX 10y ago
    Right. But it's the second half of the business strategy that I outlined above that's key to the discussion, ie the idea that paying billions of dollars for market share in this field makes sense. That's literally crazy, the network effect and lock-in at scale is really modest at best. Sure the more cars you have the better the service can be, but it's trivially easy for a competitor to come along at any time and attack your most profitable market segment in a given city, and trivially easy for any customer to switch as easily as clicking on a different app and glancing at the estimated time and price. That's going to be true forever, this isn't a market that will ever have a defensible monopoly position. Investing some amount to hedge in self-driving cars could conceivably be defensible, but looking at what's going on it feels like that's more of an rationalization for their present behavior. They've been lighting money on fire subsidizing rides for a few years, and have hunted around for a plausible excuse. One is the "pool" functions, as that has a slightly more plausible network effect story, and the other is self-driving cars. Both appear to be post-hoc rationalizations designed to provide some plausible story for why they need to borrow another couple billion dollars.
    - TheOtherHobbes 10y ago
      I wouldn't say it's trivial for a competitor to take over. The Uber app is still best-in-class, and all my friends now say "Get an uber" instead of "Get a cab" because the UX is so much smoother. Generally it's extremely difficult to dislodge an incumbent from a market slot. Newcomers can only compete on price, UX, and brand recognition. Ideally all three need to be significantly better than the incumbent to have a hope of taking over. Without all three the best a newcomer can hope for is a small slice of the pie. So market share definitely has value in the abstract. Unfortunately in Uber's case it has negative economic value because of the costs/subsidies. Then again I suppose it's possible Uber has always been a cunning plot to take VC money and spend it on subsidised transport. If so, it's definitely been a success - for now, at least.
- sulam 10y ago
  Analysts who have looked at it from the outside suggest Uber may at best be worth 1/3 its last financing round valuation. You are not alone.
- danielweber 10y ago
  > if true, this is one of the dumbest long term business strategies in the history of high finance. You speak of the first dot-com crash, but there was a lot of stupidness back then. One of my favorites is furniture.com http://www.ecommerce-digest.com/early-dot-com-failure-case-studies.html http://www.ecommerce-digest.com/early-dot-com-failure-case-s...
- deleted 10y ago
  [deleted]
- Systembolaget 10y ago
  It's déjà vu all over again. Remember "eyeballs" from 1999. Research into "autonomous driving" began 1987 with the Prometheus programme consortium, then came C2C and C2X. We have "autonomous driving" the day an automotive CEO is happily blindfolded on the back seat, alone, chauffeured a random journey through Seoul on a morning commute in monsoon season or a scooter-mania evening on Friday in Milan.
  - Systembolaget 10y ago
    So far, Uber et al. have operated on the principle of pitching easily disposable worker bees against each other, at the mercy of an opaque rating system, with zero rights to appeal, burdening them with all costs of doing business (car, insurance, maintenance, etc.) while providing nothing more than an app with server-farm back end - the classic founder/VC/underwriter/IPO-seller benefit narrative.
ProblemFactory 10y ago
> Without self-driving cars, that strategy isn't sustainable, and so eventually Uber will find itself unable to maintain its advantage over Lyft. I see the "Uber is a bet on self-driving cars" coming up in every discussion about their business plan. But even if that's true, why is there an assumption that Uber would have a monopoly on self-driving cars? Google, every car manufacturer, and a whole series of startups and universities are working on self-driving technology. If for example Google perfects it first, they will sell licenses to car manufacturers, who in turn will sell cars to Uber, Lyft, and every taxi company in every city of the world. Even if Uber develops the technology first and keeps it to themselves - then others cannot be too far behind, the potential payoff is just too great. In the end the situation is just the same as now.
- nomnombunty 10y ago
  I totally agree with you. I don't think Uber would have a monopoly on self driving cars. In terms of the tech, they are definitely not ahead of e.g. Google. According to this TechCrunch article [1] their self driving cars require human intervention every minute. [1]: https://techcrunch.com/2017/03/16/uber-recode-leaked-autonomous-vehicle-data/ https://techcrunch.com/2017/03/16/uber-recode-leaked-autonom...

by dasimon 10y ago

CPLX 10y ago

> Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses I think someone should pause to note that, if true, this is one of the dumbest long term business strategies in the history of high finance. This idea, apparently, is a bet on a technology that not only doesn't exist, but is extremely highly regulated, that the company has literally no demonstrated core competencies in, hasn't been even successfully prototyped, that represents the hardest most complex use case of the technology, and is obviously years away at best, but yet it justifies a policy of losing billions of dollars in the present just to get market share when the costs of switching brands are literally so non-existant that a typical customer often does it several times in a single evening out. Maybe it's my old age and having lived through the first dotcom crash, but it seems to me that even when you feel like the only person who sees that the underlying business logic is nonsensical magical thinking, it's still quite possible you're correct.

tyingq 10y ago
You aren't alone in that thought. Being privately held the financials are opaque enough that no outsider knows for sure how much of the spend is subsidizing the low prices, versus being used for expansion and R&D. The leaked data from Naked Capitalism is really the only data outsiders have at their disposal: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... The use of EBITAR (vs EBITDA) makes it difficult to draw real conclusions, though the fact that they use EBITAR at all is suggestive on its own.
TuringNYC 10y ago
However, something as epic as self-driving cars are one of those things that come once every two generations. SDCs, if achieved, have the potential to change the entire American way of life and massively disrupt society. Start-ups love to disrupt and this would be the mother of all disruptions. So, for that reason alone, I think firms are willing to bet a sliver of their portfolio. If I was a family office I certainly would do so.
- CPLX 10y ago
  Right. But it's the second half of the business strategy that I outlined above that's key to the discussion, ie the idea that paying billions of dollars for market share in this field makes sense. That's literally crazy, the network effect and lock-in at scale is really modest at best. Sure the more cars you have the better the service can be, but it's trivially easy for a competitor to come along at any time and attack your most profitable market segment in a given city, and trivially easy for any customer to switch as easily as clicking on a different app and glancing at the estimated time and price. That's going to be true forever, this isn't a market that will ever have a defensible monopoly position. Investing some amount to hedge in self-driving cars could conceivably be defensible, but looking at what's going on it feels like that's more of an rationalization for their present behavior. They've been lighting money on fire subsidizing rides for a few years, and have hunted around for a plausible excuse. One is the "pool" functions, as that has a slightly more plausible network effect story, and the other is self-driving cars. Both appear to be post-hoc rationalizations designed to provide some plausible story for why they need to borrow another couple billion dollars.
  - TheOtherHobbes 10y ago
    I wouldn't say it's trivial for a competitor to take over. The Uber app is still best-in-class, and all my friends now say "Get an uber" instead of "Get a cab" because the UX is so much smoother. Generally it's extremely difficult to dislodge an incumbent from a market slot. Newcomers can only compete on price, UX, and brand recognition. Ideally all three need to be significantly better than the incumbent to have a hope of taking over. Without all three the best a newcomer can hope for is a small slice of the pie. So market share definitely has value in the abstract. Unfortunately in Uber's case it has negative economic value because of the costs/subsidies. Then again I suppose it's possible Uber has always been a cunning plot to take VC money and spend it on subsidised transport. If so, it's definitely been a success - for now, at least.
sulam 10y ago
Analysts who have looked at it from the outside suggest Uber may at best be worth 1/3 its last financing round valuation. You are not alone.
danielweber 10y ago
> if true, this is one of the dumbest long term business strategies in the history of high finance. You speak of the first dot-com crash, but there was a lot of stupidness back then. One of my favorites is furniture.com http://www.ecommerce-digest.com/early-dot-com-failure-case-studies.html http://www.ecommerce-digest.com/early-dot-com-failure-case-s...
deleted 10y ago
[deleted]
Systembolaget 10y ago
It's déjà vu all over again. Remember "eyeballs" from 1999. Research into "autonomous driving" began 1987 with the Prometheus programme consortium, then came C2C and C2X. We have "autonomous driving" the day an automotive CEO is happily blindfolded on the back seat, alone, chauffeured a random journey through Seoul on a morning commute in monsoon season or a scooter-mania evening on Friday in Milan.
- Systembolaget 10y ago
  So far, Uber et al. have operated on the principle of pitching easily disposable worker bees against each other, at the mercy of an opaque rating system, with zero rights to appeal, burdening them with all costs of doing business (car, insurance, maintenance, etc.) while providing nothing more than an app with server-farm back end - the classic founder/VC/underwriter/IPO-seller benefit narrative.

ProblemFactory 10y ago

> Without self-driving cars, that strategy isn't sustainable, and so eventually Uber will find itself unable to maintain its advantage over Lyft. I see the "Uber is a bet on self-driving cars" coming up in every discussion about their business plan. But even if that's true, why is there an assumption that Uber would have a monopoly on self-driving cars? Google, every car manufacturer, and a whole series of startups and universities are working on self-driving technology. If for example Google perfects it first, they will sell licenses to car manufacturers, who in turn will sell cars to Uber, Lyft, and every taxi company in every city of the world. Even if Uber develops the technology first and keeps it to themselves - then others cannot be too far behind, the potential payoff is just too great. In the end the situation is just the same as now.

nomnombunty 10y ago
I totally agree with you. I don't think Uber would have a monopoly on self driving cars. In terms of the tech, they are definitely not ahead of e.g. Google. According to this TechCrunch article [1] their self driving cars require human intervention every minute. [1]: https://techcrunch.com/2017/03/16/uber-recode-leaked-autonomous-vehicle-data/ https://techcrunch.com/2017/03/16/uber-recode-leaked-autonom...