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Do a bit more history study and you'll realize people used to say the same thing about Amazon. It's only recently that people decided to acknowledge the fact th

Do a bit more history study and you'll realize people used to say the same thing about Amazon. It's only recently that people decided to acknowledge the fact that Amazon's "burning money" is a feature not a bug. You said "Amazon at least has proven it has a valuable model...". What you don't realize is it took almost a decade. This is actually why I have infinite respect for Jeff Bezos, he stuck around through all the criticism (almost a decade of constantly hearing "it won't work! they're not making any money" even though they have been clearly the market leader for a long time and I'm sure he had clear vision all along) and finally managed to get to a point where even the naysayers gave up.

colbyh 10y ago
Amazon's free cash flow (at least by their own definition, which I'm not attempting to debate) is tied to operating efficiency above all else. for Uber to pull the same trick it appears the only place Uber could start making more money at scale would be via autonomous cars, which Travis himself has said is critical to the success of the company: http://www.businessinsider.com/travis-kalanick-interview-on-self-driving-cars-future-driver-jobs-2016-8 http://www.businessinsider.com/travis-kalanick-interview-on-... If that's the case then Uber is a very different company with a very different business model and risks, so it's very tricky to assess it as the same company (at this point). until then it does seem like the "scale at all costs" mentality is currently coming back to bite them.
- cocktailpeanuts 10y ago
  The "operational cost" is because of competition. It's not like Uber buys up all the cars so they need tons of capital. The reason they need to spend a lot of money is they need to stay afloat until all others die off. Whether this strategy will succeed or not is absolutely not as obvious as you think, because there's of tons of history where companies that took the same road either ended up dominating the market (Youtube) or died off (Most others). I'm not saying "scale at all costs" is good, but I also sympathize with them because there's not much else they can do at this point. As soon as they start charging more and go less aggressive on marketing they will lose to their competition. But they also know there are only a few serious competitors at the moment and they all have the same struggles. So if they manage to stay afloat until the competitors die off (read: get acquired), they will have much better leverage. I'm sure that's what they're shooting for.
ithinkinstereo 10y ago
To be fair, Amazon was investing all of their money on creating moats to fend off current/future competitors, like warehouses and packing/shipping infrastructure. Most of Uber's spend is on subsidizing the cost of the product. This is a competitor moat in the sense that it outprices less-resourced competition, but it's a moat that can only be maintained by continued subsidies. The moment those subsidies end, so does the moat.
- cocktailpeanuts 10y ago
  I know that, and I'm sure guys at Uber knows that too, and probably know much more than all of us combined. They are not idiots and they think about these things every single day. If people like us who only think about it once in a while when a related article shows up on HN knows it, they do too. Just to be clear, I also think what you say is a very possible scenario, but the problem is this thesis is based on the current state of the world. Things change all the time (For example who knows where Uber would have been if this whole autonomous vehicle thing never became the reality, and there can be all kinds of variables in the future that may work for or against them) You really never know what will happen. It's easy to say the moat is not as obvious as amazon's, but Amazon's moat was not as obvious as we think nowadays back then. Not just Amazon, every single disruptive tech company went through this, nowadays it's so obvious that you can make money with search ads but when Google first came out people never understood how they were going to make money by sending people away from their site as soon as they arrive. Obvious things are only obvious in hindsight.
  - ithinkinstereo 10y ago
    It's not a matter of obviousness, though. The real question is: are they spending their money on creating a real moat that will remain once the money spigot is turned off or not? Amazon purchased real things. Uber is spending their cash on subsidizing the price. I guess you can make the argument that their moat is also their brand, but I think its very apples to oranges to compare Uber's subsidies with Amazon's infrastructure spend. I also don't by the "they are not idiots" argument. Remember, there were plenty of "geniuses" at Enron, at Bear Stearns, At Lehman, etc.

colbyh 10y ago

Amazon's free cash flow (at least by their own definition, which I'm not attempting to debate) is tied to operating efficiency above all else. for Uber to pull the same trick it appears the only place Uber could start making more money at scale would be via autonomous cars, which Travis himself has said is critical to the success of the company: http://www.businessinsider.com/travis-kalanick-interview-on-self-driving-cars-future-driver-jobs-2016-8 http://www.businessinsider.com/travis-kalanick-interview-on-... If that's the case then Uber is a very different company with a very different business model and risks, so it's very tricky to assess it as the same company (at this point). until then it does seem like the "scale at all costs" mentality is currently coming back to bite them.

cocktailpeanuts 10y ago
The "operational cost" is because of competition. It's not like Uber buys up all the cars so they need tons of capital. The reason they need to spend a lot of money is they need to stay afloat until all others die off. Whether this strategy will succeed or not is absolutely not as obvious as you think, because there's of tons of history where companies that took the same road either ended up dominating the market (Youtube) or died off (Most others). I'm not saying "scale at all costs" is good, but I also sympathize with them because there's not much else they can do at this point. As soon as they start charging more and go less aggressive on marketing they will lose to their competition. But they also know there are only a few serious competitors at the moment and they all have the same struggles. So if they manage to stay afloat until the competitors die off (read: get acquired), they will have much better leverage. I'm sure that's what they're shooting for.

ithinkinstereo 10y ago

To be fair, Amazon was investing all of their money on creating moats to fend off current/future competitors, like warehouses and packing/shipping infrastructure. Most of Uber's spend is on subsidizing the cost of the product. This is a competitor moat in the sense that it outprices less-resourced competition, but it's a moat that can only be maintained by continued subsidies. The moment those subsidies end, so does the moat.

cocktailpeanuts 10y ago
I know that, and I'm sure guys at Uber knows that too, and probably know much more than all of us combined. They are not idiots and they think about these things every single day. If people like us who only think about it once in a while when a related article shows up on HN knows it, they do too. Just to be clear, I also think what you say is a very possible scenario, but the problem is this thesis is based on the current state of the world. Things change all the time (For example who knows where Uber would have been if this whole autonomous vehicle thing never became the reality, and there can be all kinds of variables in the future that may work for or against them) You really never know what will happen. It's easy to say the moat is not as obvious as amazon's, but Amazon's moat was not as obvious as we think nowadays back then. Not just Amazon, every single disruptive tech company went through this, nowadays it's so obvious that you can make money with search ads but when Google first came out people never understood how they were going to make money by sending people away from their site as soon as they arrive. Obvious things are only obvious in hindsight.
- ithinkinstereo 10y ago
  It's not a matter of obviousness, though. The real question is: are they spending their money on creating a real moat that will remain once the money spigot is turned off or not? Amazon purchased real things. Uber is spending their cash on subsidizing the price. I guess you can make the argument that their moat is also their brand, but I think its very apples to oranges to compare Uber's subsidies with Amazon's infrastructure spend. I also don't by the "they are not idiots" argument. Remember, there were plenty of "geniuses" at Enron, at Bear Stearns, At Lehman, etc.