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"They are a software based business of course they can and will turn a profit." The aren't as software-based as many people make them out to be. They need driv

"They are a software based business of course they can and will turn a profit." The aren't as software-based as many people make them out to be. They need driverless cars to become what their current valuation and growth expectations require. Don't get me wrong, I'm long Uber and think they'll survive either way, but if others dominate them in driverless and drive prices down before Uber is ready with their own fleet, they will be forced to conduct a massive down-sizing.

bob_theslob646 9y ago
>The aren't as software-based as many people make them out to be. What does that even mean? Has Uber made a single physical product? To the best of my knowledge they do not. Yes they may have to balance wages of drivers which is arguably not easy, nor is it easy to balance human labor(capital) costs in any industry. They are a marketplace for retail transportation. I agree that driverless cars could sink their ship if they're beaten to the market first. Self-driving cars are about many years away contingent on the legal system being the way it is today. That could change.The biggest problem to self-driving cars is insurance/liability ,the areas that they are going to be used, people's ability to change/adapt to them. What people don't understand is that the most population dense places, where uber and other ride handling services are predomimatly used, happens to have many pedestrians and the shittiest infrastructure. I think even talking about self driving cars is a gigantic waste of time , borderline buzzwordiness of 'machine learning' and 'artificial intelligence'. At least those buzz words are being used today. We are nowhere near a level 5 standards.
- rco8786 9y ago
  I think the “not that much of a software company” has to do with the fact that their product is delivered in person by humans. They’re no more of a software company than UPS or Delta.
  - bob_theslob646 9y ago
    Correct.
- mikestew 9y ago
  Has Uber made a single physical product? The hair stylists and massage therapists don’t make “a single physical product”, but no one is arguing that they’re the next Microsoft. I’m still at a loss as to where you’re going with this “they’re software, of course they’ll make a profit” when they’re arguably not a software company, and it doesn’t matter because plenty of software companies have gone under.
- digitaltrees 9y ago
  I think “software business” often applies to businesses that have no physical product or human provided services and thus much higher gross and net margins. They are simply a tech enabled service provider that has to operate on very slim net margins. Totally different than surveymonkey or a pure SaaS business that has 90% gross margins.
zjaffee 9y ago
This isn't necessarily true, they could likely justify their valuation by playing a big part in the freight industry and through ubereats (as restaurants decide they no longer want to employ their own drivers). Abet, these areas still have a long way to go such as their self driving car division does.
femto113 9y ago
Driverless cars are unlikely to increase their profitability anytime soon (if ever). I dug into the math on this in some depth here: https://news.ycombinator.com/item?id=15744074 https://news.ycombinator.com/item?id=15744074 The TL;DR is that there is not enough spare profit currently going to drivers to cover the cost of buying driverless cars.
- SilasX 9y ago
  Even worse, that seems to be an optimistic estimate -- I don't think it's accounting for how Uber's ability to charge monopoly prices for self-driving car service will be temporary. Other services (from Google, Chevy, etc) will come on line and drive down the extra profits from not having to pay for drivers.
  - bob_theslob646 9y ago
    The only difference between Uber and the other companies is that Uber's main business is markeplace transportation whereas the others don't necessarily specialize in it. I'm not saying that they cannot compete but initially it's not going to be easy, like flipping a switch as so many make it out to be.
- kjksf 9y ago
  This analysis is the case of trees obscuring the forest. There is no human driven taxi business in the world where robo taxis exist. By my calculations robo taxis are 2x-4x cheaper than human driven taxis. If Uber doesn't do robo taxis then it dies the moment someone else does.
  - gaius 9y ago
    y my calculations robo taxis are 2x-4x cheaper than human driven taxis Care to share these calculations?
- bob_theslob646 9y ago
  Well that all depends on what you classify as profitable? Also whoever wrote that piece has never taken a class in accounting. There's something known as useful life of an asset.( You can write off a lot of expenses and do other clever accounting tricks that I'll never post on a public forum) They also bought one of the safest vehicles. Wait until they ( insurance companies) start charging higher rates of insurance for having a less safe vehicle AKA not newer model. They also bought the same vehicle so they can actually use scale for buying parts and services to maintain it. They also just bought a mapping fleet because wherever it goes it will take images similar to Google Street View. Uber could build its own map service. All of this reduces costs on the back end. In terms of operating costs, they can buy fuel at scale and possibly hedge which makes it incredibly cheap, talking about 20-40% cheaper than anyone else. There also was nothing mentioned about prices increasing. The fact of the matter is that prices will increase. If that's the case they can easily make that money back over 5 years. These are some thing that was not mentioned in the calculations you referenced.
Someone 9y ago
And even if they are, it’s not a given that “a software based business of course can and will turn a profit”. Your fixed costs per unit go down as you scale, but you still need to recover them, and recover your per unit variable costs to break even. For Uber, they gamble they will the only ones to have scale by the time self-driving cars drive per unit costs down, and thus can keep competition out on price and still make a healthy profit. Problem with that is that they won’t be the only one reaching that globally. That means that, for example, Chinese competition may still be able to enter Uber’s home market. That’s relatively easy if/when self-driving cars become available. It will also be interesting to see what governments will do with public transport if self-driving cars become available. They could, for example, start operating a much denser and more flexible network of (smaller) buses. That might take away part of the market Uber aims for.

bob_theslob646 9y ago

>The aren't as software-based as many people make them out to be. What does that even mean? Has Uber made a single physical product? To the best of my knowledge they do not. Yes they may have to balance wages of drivers which is arguably not easy, nor is it easy to balance human labor(capital) costs in any industry. They are a marketplace for retail transportation. I agree that driverless cars could sink their ship if they're beaten to the market first. Self-driving cars are about many years away contingent on the legal system being the way it is today. That could change.The biggest problem to self-driving cars is insurance/liability ,the areas that they are going to be used, people's ability to change/adapt to them. What people don't understand is that the most population dense places, where uber and other ride handling services are predomimatly used, happens to have many pedestrians and the shittiest infrastructure. I think even talking about self driving cars is a gigantic waste of time , borderline buzzwordiness of 'machine learning' and 'artificial intelligence'. At least those buzz words are being used today. We are nowhere near a level 5 standards.

rco8786 9y ago
I think the “not that much of a software company” has to do with the fact that their product is delivered in person by humans. They’re no more of a software company than UPS or Delta.
- bob_theslob646 9y ago
  Correct.
mikestew 9y ago
Has Uber made a single physical product? The hair stylists and massage therapists don’t make “a single physical product”, but no one is arguing that they’re the next Microsoft. I’m still at a loss as to where you’re going with this “they’re software, of course they’ll make a profit” when they’re arguably not a software company, and it doesn’t matter because plenty of software companies have gone under.
digitaltrees 9y ago
I think “software business” often applies to businesses that have no physical product or human provided services and thus much higher gross and net margins. They are simply a tech enabled service provider that has to operate on very slim net margins. Totally different than surveymonkey or a pure SaaS business that has 90% gross margins.

zjaffee 9y ago

This isn't necessarily true, they could likely justify their valuation by playing a big part in the freight industry and through ubereats (as restaurants decide they no longer want to employ their own drivers). Abet, these areas still have a long way to go such as their self driving car division does.

femto113 9y ago

Driverless cars are unlikely to increase their profitability anytime soon (if ever). I dug into the math on this in some depth here: https://news.ycombinator.com/item?id=15744074 https://news.ycombinator.com/item?id=15744074 The TL;DR is that there is not enough spare profit currently going to drivers to cover the cost of buying driverless cars.

SilasX 9y ago
Even worse, that seems to be an optimistic estimate -- I don't think it's accounting for how Uber's ability to charge monopoly prices for self-driving car service will be temporary. Other services (from Google, Chevy, etc) will come on line and drive down the extra profits from not having to pay for drivers.
- bob_theslob646 9y ago
  The only difference between Uber and the other companies is that Uber's main business is markeplace transportation whereas the others don't necessarily specialize in it. I'm not saying that they cannot compete but initially it's not going to be easy, like flipping a switch as so many make it out to be.
kjksf 9y ago
This analysis is the case of trees obscuring the forest. There is no human driven taxi business in the world where robo taxis exist. By my calculations robo taxis are 2x-4x cheaper than human driven taxis. If Uber doesn't do robo taxis then it dies the moment someone else does.
- gaius 9y ago
  y my calculations robo taxis are 2x-4x cheaper than human driven taxis Care to share these calculations?
bob_theslob646 9y ago
Well that all depends on what you classify as profitable? Also whoever wrote that piece has never taken a class in accounting. There's something known as useful life of an asset.( You can write off a lot of expenses and do other clever accounting tricks that I'll never post on a public forum) They also bought one of the safest vehicles. Wait until they ( insurance companies) start charging higher rates of insurance for having a less safe vehicle AKA not newer model. They also bought the same vehicle so they can actually use scale for buying parts and services to maintain it. They also just bought a mapping fleet because wherever it goes it will take images similar to Google Street View. Uber could build its own map service. All of this reduces costs on the back end. In terms of operating costs, they can buy fuel at scale and possibly hedge which makes it incredibly cheap, talking about 20-40% cheaper than anyone else. There also was nothing mentioned about prices increasing. The fact of the matter is that prices will increase. If that's the case they can easily make that money back over 5 years. These are some thing that was not mentioned in the calculations you referenced.

Someone 9y ago

And even if they are, it’s not a given that “a software based business of course can and will turn a profit”. Your fixed costs per unit go down as you scale, but you still need to recover them, and recover your per unit variable costs to break even. For Uber, they gamble they will the only ones to have scale by the time self-driving cars drive per unit costs down, and thus can keep competition out on price and still make a healthy profit. Problem with that is that they won’t be the only one reaching that globally. That means that, for example, Chinese competition may still be able to enter Uber’s home market. That’s relatively easy if/when self-driving cars become available. It will also be interesting to see what governments will do with public transport if self-driving cars become available. They could, for example, start operating a much denser and more flexible network of (smaller) buses. That might take away part of the market Uber aims for.