6 ms·

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low.

• amenghra 9y ago
  > big network effects at play What is Uber's network effect? Most people I know will use whatever app gives them the cheapest ride / will drive for multiple companies. There might even be an opportunity for a $1 app that tells you which service you should use at any given time/location.
  • habosa 9y ago
    You need enough drivers to get a ride on demand at any time/location and enough riders to keep them busy. Too few drivers you get long waits or surge prices. Too few riders and the drivers start to disappear...
    • amenghra 9y ago
      That's called a two-sided-marketplace. It quickly saturates (i.e. you need some minimum number of drivers and riders to bootstrap the marketplace). Network effect is when each user brings additional users (or each user prevents other users from leaving).
      • leereeves 9y ago
        It doesn't quickly saturate when the two sides of the market need to be within a few miles of each other.
      • stale2002 9y ago
        It is not just about saturation. For every additional driver, the density of drivers on a map gets higher. When this happens, statistically the closest driver will take X less time to get to you. Two sided markets are not about having a minimum number of people. Two sided markets are literally a network effect. https://en.m.wikipedia.org/wiki/Two-sided_market https://en.m.wikipedia.org/wiki/Two-sided_market The "traditional" network effect is describing one sided markets. But it is a normal economic concept to talk about the two sided network effect as well. Think of it this way. In a 1 sided network, ever user type A makes it more valuable for other user type As. In a two sided market every User A makes the network more valueable for User type Bs. And every User type B makes it more valuable for user type As.
        • repsilat 9y ago
          > When this happens, statistically the closest driver will take X less time to get to you. If everyone is spaced evenly around the place and there's no congestion, you need four times as many drivers to halve response times. For a while you get good gains per additional driver, but as the numbers increase the marginal benefit tails off. This means a new player with some capital can likely compete (and is probably what the grandparent meant by "saturation".)
          • amenghra 9y ago
            The same thing happens from the driver's point of view. Each additional rider adds a marginal value to any given driver; there's only so many rides they can make in a given day. In most two-sided markets, the ratio of users on both sides plays a more important role than absolute numbers.
  • dredmorbius 9y ago
    Network effects apply to any system with links and nodes. Uber sees this through its financing, application, comms network, drivers, members/subscribers, and political influence. Transport, comms, data/information, knowledge itself, and land are all classic networks, subject to network effects, and monopoly pressures.
• SeoxyS 9y ago
  I'd like to know how someone drives 3.5mi daily for $2.50 with Uber, even with pool, in SF. My pool rides start out at around $4 one-way, for .5mi and under. UberX is $7+ at minimum, and quickly tops $10 for 1mi+ trips.
  • habosa 9y ago
    Edit: "Express POOL is a new kind of shared ride that begins and ends at convenient Express spots. Update your app today to start riding for as low as $2.” It's not Uber Pool it's some new product I hadn't heard of before he mentioned it. Shared ride with a fixed pickup point. I see the same pricing you see when I use Uber/Lyft.
    • jakob223 9y ago
      ergh why are we reinventing buses as an app
      • habosa 9y ago
        Agree. But since the bus in SF is $2.50 I can see why my friend takes the Uber.
        • nicolewhite 9y ago
          The Uber is also safer, cleaner, and more reliable.
          • TheDong 9y ago
            I highly doubt that "safer" is correct; on average, buses have fewer deaths per km traveled. Uber drivers are generally decent drivers, but they're still not as well trained as bus drivers, they're more likely to be distracted by e.g. fiddling with the uber or map apps on their phone. Unless you have numbers specifically about uber's fleet being significantly safer than typical drivers, your claim goes against the results of recent studies finding busses and rails safer than cars.
• conanbatt 9y ago
  If you were an Uber investor, and they told you that they are going to blow your money below margin of operations for years to come, would you feel happy about it? Do you prefer to be the dumper or the dumpee? Because I prefer to be the latter. > Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. It's just a car. Its super easy to break into that market. And there are competitors. They do not have a sustainable monopoly.
  • dhimes 9y ago
    If they weren't they wouldn't let them do it. Maybe amateur investors will get upset, but as I said in another comment the pros know that this tactic will not only scare off competition, this will scare off potential competition. Few will fund a company to compete against an incumbent who is large and powerful enough to do this to you. There are other battles to be fought, so why risk it?
    • conanbatt 9y ago
      I wouldn't compete against someone stabbing himself either...
• basseq 9y ago
  What Uber is doing here should absolutely not be allowed. What Uber is doing is called loss leading. It would be very hard to outlaw or regulate in any sort of "fair" way. The result you fear--a monopoly with price control--is illegal and is tightly regulated.
  • Y7ZCQtNo39 9y ago
    The claim that it is tightly regulated could be subject to debate. The amount of regulatory capture currently occurring plus what occurred in the previous decades squarely classifies the United States as a plutocracy. The AT&T merger may be blocked, just because Donald Trump (via the Justice Department) doesn't like CNN. Think about that. It's an incredible consolidation of power. While I agree it's hard to outlaw or regulate loss leading, since it seems to be a common go-to-market strategy, it prevents the smaller guys from competing. It allows those with the upper hand (more capital) to remain dominant and starve out the competition. And the feared result, could very well occur. I wouldn't trust the United States to regulate as heavily as it used to, especially under the purview of Donald Trump.
  • crdoconnor 9y ago
    >The result you fear--a monopoly with price control--is illegal Monopolies are not illegal.
    • Veen 9y ago
      > Monopolies are not illegal No, they aren't. But can you think of any examples of a company that built a monopoly and refrained from exploiting it to the detriment of the market and consumers in the long term?
    • TheCoelacanth 9y ago
      Monopolies are not per se illegal, but it is illegal to create a monopoly.
    • vorotato 9y ago
      Natural monopolies are not illegal, anti-competitive ones however...
• stale2002 9y ago
  Ok, maybe it hurts competitors, but how in the world does it mess with public transportation? Public transportation can't handle the load across the country. If everyone starts using VC subsidized services, that FIXES the public transportation under capacity problem. Public transportation loses money. So if people find something better or cheaper, then all the better!
  • TheDong 9y ago
    > Ok, maybe it hurts competitors, but how in the world does it mess with public transportation? ... If everyone starts using VC subsidized services... If no one uses public transit, public transit will be hurt clearly. The real risk though is that people who can afford uber start using it, public transit fails, and then uber increases its price since people have fewer options. > Public transportation loses money. So Public transit loses money in a narrow view of things. In the grand scheme though, it's paid for by tax dollars and is for the good of the public. There have been a few studies that show accessible public transit is a huge factor in benefiting the poor[0]. The fact that it's subsidized by taxes (and thus moreso by the rich than the poor) is part of the reason it can benefit those people who aren't so well off. If a VC subsidized service takes over, well, VC subsidization is a far less sustainable method of providing for the poor than taxes. 0: https://www.nytimes.com/2015/05/07/upshot/transportation-emerges-as-crucial-to-escaping-poverty.html https://www.nytimes.com/2015/05/07/upshot/transportation-eme...
    • dpatru 9y ago
      > There have been a few studies that show accessible public transit is a huge factor in benefiting the poor. No doubt being able to travel is a huge benefit. But this does not require public transport. The poor could be given Uber-vouchers.
      • HashHishBang 9y ago
        They could...or we could keep utilizing the multi-billion dollar investments that have been made in public transportation. I'm curious as to the arguments that can be made for (presumably government) subsidies for privatized individual transport. I'd be shocked if we see Uber pivot from normal vehicles into mass transit so we have to assume they continue using the current model. At that point we're offering vouchers for semi-private drivers because...we don't like public transit?
• dingo_bat 9y ago
  I am very happy. Uber has saved me from buying a car for 2-3 years now. Honestly this is the best time for consumers.
• mathattack 9y ago
  Drivers aren't locked in, and neither are the passengers.
• dpatru 9y ago
  Productivity in any market requires investment. Here Uber needs to build a network of drivers and passengers, so they spend money subsidizing rides until the network grows to a sustainable size. How is this different than what any other competitor does? For example, bus transport companies need to buy buses and arrange routes before they can take passengers. Manufacturing companies need to design products and build factories before they can produce. Skilled workers need to go to school and practice before they can be hired as skilled workers. Etc. The exact nature of investment varies, but the general idea that competing effectively requires upfront investment is the same. Investment is not unfair; it is how productivity rises and civilization progresses. > There's a fixed supply of willing drivers ... The supply of willing drivers varies by wages. Also the supply of willing passengers varies by prices. Uber's success depends on being able to entice drivers with higher wages and passengers with lower prices. To the extent that they are successful, they make both groups better off. > Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. There's a fixed supply of willing drivers and big network effects at play. This is exactly backwards. Once a large network of drivers and passengers connected by smartphones has been established, a competitor has only to offer its own smartphone app to compete. The hard part is building the network and changing people's behaviors.
  • dhimes 9y ago
    GP's not talking about investing in infrastructure or training. GP's talking about selling the product for less than it costs to produce in order to have a monopoly in the region. This not only discourages the competition, it discourages the existence of competition. Back in "the day," VCs (at least some) would tell you directly that they wouldn't invest in anything that competes with Microsoft. The legality of it all was irrelevant to the conversation- they weren't going to enter the fight.
    • dpatru 9y ago
      Uber's network of drivers is way of providing transportation services. This network doesn't just spring into existence. It must be created and it costs money. A traditional bus service also costs money; the buses must be purchased, the drivers hired and paid, the routes established and signs posted, etc. Why isn't a bus company unfairly competing with taxis by offering lower fares based on massive upfront investments in bigger vehicles that are paid back over many years? Uber's "bus" is its network. > monopoly in the region There is no monopoly in transportation. People can drive their own cars, take buses, take taxies, ride Lyft, walk, bike, etc. Uber is creating a network. > This not only discourages the competition, it discourages the existence of competition. Discouraging competition is the same as discouraging the existence of competition. To compete effectively against any good business requires investment. Uber is competing against the taxi network, bus services, zipcar, etc. Uber's strategy requires investment in building a network of drivers that can quickly reach anyone in the service area. To build this network, they have to invest in drivers and passengers. They do this by paying drivers more than they produce and offering passengers service for less than it costs. As more drivers and passengers join the network, costs come down, service gets better, prices may be able to be raised, and Uber may be able to recoup its investment and earn a profit. Maybe. if they earn too much of a profit by charging passengers too much or paying drivers too little, they risk being replaced by other app makers who offer Uber's network of drivers and passengers a better deal. It's uncertain if Uber will be profitable. But in trying to be profitable, Uber is definitely offering drivers and passengers better options than what they already have (otherwise, the drivers and passengers would not be using Uber).
• SamReidHughes 9y ago
  IRS vehicle costs are not the actual vehicle costs, which are lower.
• posterboy 9y ago
  > There's a fixed supply of willing drivers i.e. there's a fixed supply of willingness?