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What this piece misses the obvious financial privilege that many startups have. Uber is slaying yellow/black cabs around the world, but only by massively subsid

by jedrek 9y ago

What this piece misses the obvious financial privilege that many startups have. Uber is slaying yellow/black cabs around the world, but only by massively subsidizing its rides through investment capital. Amazon is the world's largest store, by working on margins that don't let people who actually expect a return on the investment compete. It's gotten to the point that if a company actually does things the old fashioned way: taking a small seed, creating a product that people want, selling it and expanding based on that revenue... we ooh and ahh, calling it "organic growth". Everywhere else, it's just called "building a business". Pair that with the "thought leaders" who dismiss businesses that allow people to build a life for themselves and their families. Because Silicon Valley isn't really about making things anymore, it's about making financial bets. And that's a shame - watching billionaires blow money on reinventing the vending machine isn't much fun.

pathseeker 9y ago
>but only by massively subsidizing its rides through investment capital This is not true for many cities. Most of the subsidizing only happens in new markets to get people interested. Uber/Lyft are still better than cabs when unsubsidized.
- jedrek 9y ago
  The subsidizing happens to find drivers and passengers. When Uber came to my city, it was months before I paid for a ride, and drivers told us all about how they were getting cash bonuses for working high traffic times. No matter how optimistic you are about the product, Uber isn't worth a fraction of its valuation without the constant expansion, and the constant expansion is impossible without very inexpensive money that is VC.
- ExactoKnight 9y ago
  The cheaper price comes almost entirely from the driver making less. Love it or hate it, that's really the big difference now that most existing cab companies now have Uber-like dispatch technology.
  - thephyber 9y ago
    Some taxi companies buy new cars, which adds overhead, but largely I think the Uber/Lyft driver model doesn't work for a full-time wage. It's great supplemental income for some. From hearing many interviews with Uber drivers, I've gathered that most are happy about the opportunity and possibilities in the beginning but then realize within a year that it's a meager living (less than minimum wage). They also notice that their profit margins can easily be eaten away by Uber's rev share changes or when Uber tests the price elasticity of a market. Anecdotally, Uber drivers don't last more than about 2 years. My father is a sole proprietor limo driver who has occasionally tried driving for Uber.
  - pathseeker 9y ago
    Sure, but that's not a subsidy anymore. They've just found a way to provide a service for cheaper.
jartelt 9y ago
Uber/lyft are also slaying yellow/black cabs because the cabs chose to just milk their monopoly for maximum profit for 30 years rather than invest in any technology or make any improvements to rider experience or comfort. It's not just the subsidies. It's the fact that calling random 800 numbers trying to get a cab is really frustrating, especially when they do not show up 20% of the time. For Amazon... are their margins really that much smaller than Walmart, Target, Costco or anything other big box discount retailer? Many products at Amazon can be found cheaper in a store. It's just really damn convenient to order it on Amazon and have it shipped the next day.
- jonbarker 9y ago
  Amazon's stated goal is to have no margins (Bezos 'your margin is my opportunity'). So yes if they are following their zero margin strategy they should be lower than WMT, whose only claim is low price. If something is cheaper elsewhere it is because Amazon has not figured out how to deliver that particular item to the consumer at cost yet. So for example if you find something cheaper at WMT it may be that WMT has a great distributor license and is an exclusive channel, something like that.
  - tome 9y ago
    Huh? So how does Amazon actually make money?
    - bb611 9y ago
      They don't have no margin (i.e. nothing is 'at cost' as GP presumes), they just have very low margins which they make up for with high volume. It's not that novel, but Bezos has created a company with tolerance for lower margins.
    - snark42 9y ago
      > Huh? So how does Amazon actually make money? They sell at/near their cost (including warehousing, delivery, technology, etc.) which is lower than the cost of Walmart's brick and mortar presence. Costco also sells at cost, almost all their profit is from membership fees (see Amazon Prime for Amazon's take on this.)
deleted 9y ago
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by jedrek 9y ago

pathseeker 9y ago

>but only by massively subsidizing its rides through investment capital This is not true for many cities. Most of the subsidizing only happens in new markets to get people interested. Uber/Lyft are still better than cabs when unsubsidized.

jedrek 9y ago
The subsidizing happens to find drivers and passengers. When Uber came to my city, it was months before I paid for a ride, and drivers told us all about how they were getting cash bonuses for working high traffic times. No matter how optimistic you are about the product, Uber isn't worth a fraction of its valuation without the constant expansion, and the constant expansion is impossible without very inexpensive money that is VC.
ExactoKnight 9y ago
The cheaper price comes almost entirely from the driver making less. Love it or hate it, that's really the big difference now that most existing cab companies now have Uber-like dispatch technology.
- thephyber 9y ago
  Some taxi companies buy new cars, which adds overhead, but largely I think the Uber/Lyft driver model doesn't work for a full-time wage. It's great supplemental income for some. From hearing many interviews with Uber drivers, I've gathered that most are happy about the opportunity and possibilities in the beginning but then realize within a year that it's a meager living (less than minimum wage). They also notice that their profit margins can easily be eaten away by Uber's rev share changes or when Uber tests the price elasticity of a market. Anecdotally, Uber drivers don't last more than about 2 years. My father is a sole proprietor limo driver who has occasionally tried driving for Uber.
- pathseeker 9y ago
  Sure, but that's not a subsidy anymore. They've just found a way to provide a service for cheaper.

jartelt 9y ago

Uber/lyft are also slaying yellow/black cabs because the cabs chose to just milk their monopoly for maximum profit for 30 years rather than invest in any technology or make any improvements to rider experience or comfort. It's not just the subsidies. It's the fact that calling random 800 numbers trying to get a cab is really frustrating, especially when they do not show up 20% of the time. For Amazon... are their margins really that much smaller than Walmart, Target, Costco or anything other big box discount retailer? Many products at Amazon can be found cheaper in a store. It's just really damn convenient to order it on Amazon and have it shipped the next day.

jonbarker 9y ago
Amazon's stated goal is to have no margins (Bezos 'your margin is my opportunity'). So yes if they are following their zero margin strategy they should be lower than WMT, whose only claim is low price. If something is cheaper elsewhere it is because Amazon has not figured out how to deliver that particular item to the consumer at cost yet. So for example if you find something cheaper at WMT it may be that WMT has a great distributor license and is an exclusive channel, something like that.
- tome 9y ago
  Huh? So how does Amazon actually make money?
  - bb611 9y ago
    They don't have no margin (i.e. nothing is 'at cost' as GP presumes), they just have very low margins which they make up for with high volume. It's not that novel, but Bezos has created a company with tolerance for lower margins.
  - snark42 9y ago
    > Huh? So how does Amazon actually make money? They sell at/near their cost (including warehousing, delivery, technology, etc.) which is lower than the cost of Walmart's brick and mortar presence. Costco also sells at cost, almost all their profit is from membership fees (see Amazon Prime for Amazon's take on this.)

deleted 9y ago

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