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The key word here is "burning." If Uber's quarterly losses were caused by productive spending they could have a chance. Since their mounting losses are mostly c

by mkempe 9y ago

The key word here is "burning." If Uber's quarterly losses were caused by productive spending they could have a chance. Since their mounting losses are mostly caused by consumption the company is not going to survive. They recently announced a plan to purchase 24,000 Volvo XC90s for self-driving, to be delivered from 2019 to 2021, at a cost of about $1b. That would qualify as productive spending, capital invested for the purpose of greater production. But that's going to be too late, and if I were running Volvo I would not count on those sales...

JumpCrisscross 9y ago
> If Uber's quarterly losses were caused by productive spending they could have a chance I am reminded of John Maynard Keynes' words. "The market can remain irrational longer than you can remain solvent." It speaks of the financing coming home to roost before its labors have borne fruit. Uber may be financing productive spending. But if it runs out of money before the spending makes a return, it was for naught. Uber played two games. One, buying expected long-term profits with short-term loss-making spending. Two, overwhelming the competition with scale. There is an adage admonishing attempts to make up unit losses with volume. Uber sustained losing money at volume by promising investors its long-term gains. As long as Uber could raise financing, the long-term gains were safe. This dynamic mirrors the asset-liability mismatch that creates banks' run risk. Uber is reliant on short-term fundraising to finance its long-term competitive position. Those short-term backers are now becoming nervous. Just like a bank facing a run, the only choice is to cut, cut, cut.
basseq 9y ago
Yet a portion of this "burn" goes towards a massive growth rate / expansion. Could Uber "operate" with a 30% haircut to costs, let alone shifting from "market entry" pricing to something more sustainable?
Bartweiss 9y ago
> for self-driving, to be delivered from 2019 to 2021 I've believed for years that Uber was effectively a self-driving car company which rolled the dice on building an international userbase ahead of time, hoping to be first to market when the tech finally reached market. I can't even say if it's purposeful, but it's certainly true that recapturing half of their driver payments (the other half going to capital and maintenance costs) would drastically change their financial situation. But at this point, it doesn't look like they'll ever get to take a shot at that position; it'll go to Lyft, Fasten, or some other second-mover which spent less money and ran fewer risks.

by mkempe 9y ago

JumpCrisscross 9y ago

> If Uber's quarterly losses were caused by productive spending they could have a chance I am reminded of John Maynard Keynes' words. "The market can remain irrational longer than you can remain solvent." It speaks of the financing coming home to roost before its labors have borne fruit. Uber may be financing productive spending. But if it runs out of money before the spending makes a return, it was for naught. Uber played two games. One, buying expected long-term profits with short-term loss-making spending. Two, overwhelming the competition with scale. There is an adage admonishing attempts to make up unit losses with volume. Uber sustained losing money at volume by promising investors its long-term gains. As long as Uber could raise financing, the long-term gains were safe. This dynamic mirrors the asset-liability mismatch that creates banks' run risk. Uber is reliant on short-term fundraising to finance its long-term competitive position. Those short-term backers are now becoming nervous. Just like a bank facing a run, the only choice is to cut, cut, cut.

basseq 9y ago

Yet a portion of this "burn" goes towards a massive growth rate / expansion. Could Uber "operate" with a 30% haircut to costs, let alone shifting from "market entry" pricing to something more sustainable?

Bartweiss 9y ago

> for self-driving, to be delivered from 2019 to 2021 I've believed for years that Uber was effectively a self-driving car company which rolled the dice on building an international userbase ahead of time, hoping to be first to market when the tech finally reached market. I can't even say if it's purposeful, but it's certainly true that recapturing half of their driver payments (the other half going to capital and maintenance costs) would drastically change their financial situation. But at this point, it doesn't look like they'll ever get to take a shot at that position; it'll go to Lyft, Fasten, or some other second-mover which spent less money and ran fewer risks.