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Uber's valuation is based on a formula that looks something like (raw brand value in an autonomous car world) - (burn rate)^(number of years until autonomous ca

Uber's valuation is based on a formula that looks something like (raw brand value in an autonomous car world) - (burn rate)^(number of years until autonomous cars are widespread). The valuation can be quite high if you assume that the value in the exponent is low. But I personally think that the "autonomous vehicle revolution" is not going to pay off as well for Uber as they had hoped. It's becoming more clear that the market for autonomous vehicles isn't going to look like the market for human-driven ones -- and vehicle manufacturers are going to be looking to build their own self-driving auto services rather than sell self-driving vehicles directly to consumers. Uber's biggest innovation was their app. Even complex apps like Uber are not hard to clone if you have any sort of budget. There's an assumption a lot of investors make about their brand value: it assumes that another, already strong brand does not enter the same market. Seeing as Tesla has made no secret of their intentions to compete directly with Uber in the ride-hailing space, I don't think that's a fair assumption. Would you rather call an Uber or a Tesla at this point? And what does buying a Tesla in that scenario even look like? Do you buy a car and rent it out a la Airbnb when you're not using it? How much money do you get for that, and how much of a cut does Tesla get since it's their algorithms actually driving the car? Don't get me wrong; the brand value is actually really high because hundreds of millions of wealthy customers worldwide know Uber. Even if the company fails spectacularly, someone will buy them for a few billion in a fire sale just for the brand.

emilsedgh 9y ago
I don't think Uber's valuation is based on autonomous cars. That would be a really stupid bet for investors. Autonomous cars are a side bet. A few hundred millions in R&D that would also attract good talent and nice PR for Uber. But I don't think investors were stupid enough to invest billions into Uber based on that bet. Specially considering the fact that anyone who gets that technology first can make it big and Google had a few years of head start.
- WalterSear 9y ago
  Uber's valuation has to be based on an anticipation of autonomous vehicles. Otherwise, whether self-driving cars arrive in 5 years or 10, investors are putting money into a horse-and-buggy company.
  - rayiner 9y ago
    Not necessarily. If your projection is that widespread autonomous vehicles don't arrive for 30 years, there is a lot of money in the meantime to be made being a horse-and-buggy company.
jonnathanson 9y ago
Tesla's taking a very long view. They are thinking about what the world will look like when autonomous cars are ubiquitous, and then working backwards from some of the pretty gnarly realizations that sink in when you do that sort of thinking. You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go. So what still matters? Price. Comfort. Amenities. The upsell becomes the main sell. At a certain point, Tesla isn't even selling "cars" so much as it's selling mobile offices to one segment, and mobile living rooms to another segment. I could also see Tesla finding a way to place the burden of price elsewhere and offer effectively "free" cars to consumers. For instance, leasing or selling fleets to employers. Or to cities. Or to Uber. Or to Amazon. Uber, on the other hand, sees a world in which nobody owns a car, nobody drives a car, and everyone hails an automated car whenever and wherever. Like that scene in Minority Report. Both of their strategies are banking on the idea that cars, as we currently understand and experience them, will eventually become pure commodities. The difference is that Tesla is seeking margin and Uber is seeking volume. The cliche that Tesla is Apple and Uber is Amazon is sort of true in that respect.
- exelius 9y ago
  I think Tesla also understands that once autonomous cars are ubiquitous, you won't own one: you'll just rent one for whatever needs you have in that moment. I think the best analog for the market dynamics that this will create is the airline industry -- a fleet of vehicles will be a massive investment, and ongoing maintenance, government oversight, etc. will be similarly cumbersome. But the job of the airline (actually operating the plane) is being done by the company creating the algorithms. That's a market control point that can be leveraged. That's why ultimately, I feel Uber will end up being the Expedia/Priceline of the self-driving car industry. If you don't control the means of value production, you become a middleman. There's a reason they were working on their own self-driving tech rather than licensing from someone else -- everyone who is actually building this tech likely told them "go shove it, we can recreate what you do far easier than you can recreate what we do".
  - 9y ago

emilsedgh 9y ago

I don't think Uber's valuation is based on autonomous cars. That would be a really stupid bet for investors. Autonomous cars are a side bet. A few hundred millions in R&D that would also attract good talent and nice PR for Uber. But I don't think investors were stupid enough to invest billions into Uber based on that bet. Specially considering the fact that anyone who gets that technology first can make it big and Google had a few years of head start.

WalterSear 9y ago
Uber's valuation has to be based on an anticipation of autonomous vehicles. Otherwise, whether self-driving cars arrive in 5 years or 10, investors are putting money into a horse-and-buggy company.
- rayiner 9y ago
  Not necessarily. If your projection is that widespread autonomous vehicles don't arrive for 30 years, there is a lot of money in the meantime to be made being a horse-and-buggy company.

jonnathanson 9y ago

Tesla's taking a very long view. They are thinking about what the world will look like when autonomous cars are ubiquitous, and then working backwards from some of the pretty gnarly realizations that sink in when you do that sort of thinking. You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go. So what still matters? Price. Comfort. Amenities. The upsell becomes the main sell. At a certain point, Tesla isn't even selling "cars" so much as it's selling mobile offices to one segment, and mobile living rooms to another segment. I could also see Tesla finding a way to place the burden of price elsewhere and offer effectively "free" cars to consumers. For instance, leasing or selling fleets to employers. Or to cities. Or to Uber. Or to Amazon. Uber, on the other hand, sees a world in which nobody owns a car, nobody drives a car, and everyone hails an automated car whenever and wherever. Like that scene in Minority Report. Both of their strategies are banking on the idea that cars, as we currently understand and experience them, will eventually become pure commodities. The difference is that Tesla is seeking margin and Uber is seeking volume. The cliche that Tesla is Apple and Uber is Amazon is sort of true in that respect.

exelius 9y ago
I think Tesla also understands that once autonomous cars are ubiquitous, you won't own one: you'll just rent one for whatever needs you have in that moment. I think the best analog for the market dynamics that this will create is the airline industry -- a fleet of vehicles will be a massive investment, and ongoing maintenance, government oversight, etc. will be similarly cumbersome. But the job of the airline (actually operating the plane) is being done by the company creating the algorithms. That's a market control point that can be leveraged. That's why ultimately, I feel Uber will end up being the Expedia/Priceline of the self-driving car industry. If you don't control the means of value production, you become a middleman. There's a reason they were working on their own self-driving tech rather than licensing from someone else -- everyone who is actually building this tech likely told them "go shove it, we can recreate what you do far easier than you can recreate what we do".
- 9y ago