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So let's stipulate for now that this idea (all self-driving cars) is their "end game" for the sake of argument. If you take their current numbers, and set the

So let's stipulate for now that this idea (all self-driving cars) is their "end game" for the sake of argument. If you take their current numbers, and set the amount of money they pay drivers to 0. Are they profitable? While you could imagine that money going to the service instead, the missing piece there is that the drivers own (or lease) their cars and absorb that cost, so does what the driver makes cover the costs associated with owning the vehicle? (gas/energy, depreciation, maintenance, insurance) Does doing this at scale have better margins than say an individual offering their self driving car as a livery service during the 'off hours' and keeping all the money it generates?

bermanoid 8y ago
If the drivers made less than it cost them to maintain their vehicles, they wouldn't be doing it. I know that a lot of people think the drivers generally are that stupid, but I'm skeptical.
- lazyasciiart 8y ago
  Even if every driver knew for certain that the income wouldn't cover the longterm cost of wear, there would still be drivers who needed money now enough to trade the future value of their car.
  - ghaff 8y ago
    Which I imagine happens a lot. I expect a lot of/most drivers have at least a vague sense that a decent chunk of their earnings are going to get eaten up down the road in new tires, maintenance, etc. But they have rent due next week so...
- ChuckMcM 8y ago
  You miss the obvious driver who is not an Uber driver only but one who is an Uber driver as a side hustle. This person owns a car for their own reasons, they want to drive around and have access to a vehicle. They 'rent' that expense to Uber which comes out of their compensation. Here is another way to look at it. Someone who rents their apartment on AirBnB for one week a month which generates enough revenue to pay their rent, and they live in the apartment the other weeks of the month. This arbitraging of costs is similar to what Uber drivers do. If Uber were to shift completely to self driven cars, all of their arbitrage ability would be lost, as the full costs of the cars would then be on their books. Now if the business model of having cars available 24hrs a day and there was no drivers fee allowed them to be profitable, that would be an interesting model. Of course one of the things that is going to happen in self driven cars will be things like drunk people throwing up all over the car, resulting in the car being out of service while someone cleans it. Or being defrauded when someone steals a phone and tells a self driving uber to drive them to the next state so they can sleep in the back seat. Then you are back to a security guard who is watching cameras of cars, but how many do you need of those? What do they get paid, are they 'contractors' or employees? I'm rooting for them to change the world for the better but I've been unable to guess at a business model that would allow them to be profitable yet.
  - ghaff 8y ago
    The cost equation for AirBnB and robo-Uber--when used in the sense of renting out personal property as a side hustle--are different though. If you're away for the weekend or a business trip, there's very little $$ cost associated with renting out your condo for the weekend (ignoring the risk of a bad renter). It's arguably (almost) free money, again, depending on how you quantify the risk. The cost of a car, on the other hand, is mostly related to how many miles it's driven, not over how many years it's driven. There are some time-based costs (taxes, insurance mostly, rust in snow states, having older tech) but it's mostly distance.
nabaraz 8y ago
> If you take their current numbers, and set the amount of money they pay drivers to 0. Are they profitable? Easily. They paid ~$8bln to drivers last quarter. They merely lost ~$2bln in 2018.
- linkregister 8y ago
  The payments they made to drivers included the cost of ownership of the car, fuel, insurance, etc. Labor is the most expensive piece, but is not the only piece of that.
hakfoo 8y ago
If done right, it's probably always preferable to own the fleet yourself. You can presumably get better economies of scale on purchasing, fueling, maintaining, and insuring the vehicles. On the current market with human drivers, there are some odd incentives to the contrary though. Using driver-provided vehicles probably helps make the "they're independent contractors" legal argument. There's also the storage yard problem-- if you own a fleet, you're going to have to provide a place for the drivers to come to, park their own cars, and get into yours. I also suspect it lets them cast off the "unknown unknowns" -- damage and insurance claims, underpriced routes. And yes, there are likely opportunities to exploit new recruits by paying below their actual costs. Once you have self-driving, many of those incentives vanish. Your biggest win comes from calling up GM and ordering cars 10,000 at a time, which a new-to-market entrant can't afford to do.

bermanoid 8y ago

If the drivers made less than it cost them to maintain their vehicles, they wouldn't be doing it. I know that a lot of people think the drivers generally are that stupid, but I'm skeptical.

lazyasciiart 8y ago
Even if every driver knew for certain that the income wouldn't cover the longterm cost of wear, there would still be drivers who needed money now enough to trade the future value of their car.
- ghaff 8y ago
  Which I imagine happens a lot. I expect a lot of/most drivers have at least a vague sense that a decent chunk of their earnings are going to get eaten up down the road in new tires, maintenance, etc. But they have rent due next week so...
ChuckMcM 8y ago
You miss the obvious driver who is not an Uber driver only but one who is an Uber driver as a side hustle. This person owns a car for their own reasons, they want to drive around and have access to a vehicle. They 'rent' that expense to Uber which comes out of their compensation. Here is another way to look at it. Someone who rents their apartment on AirBnB for one week a month which generates enough revenue to pay their rent, and they live in the apartment the other weeks of the month. This arbitraging of costs is similar to what Uber drivers do. If Uber were to shift completely to self driven cars, all of their arbitrage ability would be lost, as the full costs of the cars would then be on their books. Now if the business model of having cars available 24hrs a day and there was no drivers fee allowed them to be profitable, that would be an interesting model. Of course one of the things that is going to happen in self driven cars will be things like drunk people throwing up all over the car, resulting in the car being out of service while someone cleans it. Or being defrauded when someone steals a phone and tells a self driving uber to drive them to the next state so they can sleep in the back seat. Then you are back to a security guard who is watching cameras of cars, but how many do you need of those? What do they get paid, are they 'contractors' or employees? I'm rooting for them to change the world for the better but I've been unable to guess at a business model that would allow them to be profitable yet.
- ghaff 8y ago
  The cost equation for AirBnB and robo-Uber--when used in the sense of renting out personal property as a side hustle--are different though. If you're away for the weekend or a business trip, there's very little $$ cost associated with renting out your condo for the weekend (ignoring the risk of a bad renter). It's arguably (almost) free money, again, depending on how you quantify the risk. The cost of a car, on the other hand, is mostly related to how many miles it's driven, not over how many years it's driven. There are some time-based costs (taxes, insurance mostly, rust in snow states, having older tech) but it's mostly distance.

nabaraz 8y ago

> If you take their current numbers, and set the amount of money they pay drivers to 0. Are they profitable? Easily. They paid ~$8bln to drivers last quarter. They merely lost ~$2bln in 2018.

linkregister 8y ago
The payments they made to drivers included the cost of ownership of the car, fuel, insurance, etc. Labor is the most expensive piece, but is not the only piece of that.

hakfoo 8y ago

If done right, it's probably always preferable to own the fleet yourself. You can presumably get better economies of scale on purchasing, fueling, maintaining, and insuring the vehicles. On the current market with human drivers, there are some odd incentives to the contrary though. Using driver-provided vehicles probably helps make the "they're independent contractors" legal argument. There's also the storage yard problem-- if you own a fleet, you're going to have to provide a place for the drivers to come to, park their own cars, and get into yours. I also suspect it lets them cast off the "unknown unknowns" -- damage and insurance claims, underpriced routes. And yes, there are likely opportunities to exploit new recruits by paying below their actual costs. Once you have self-driving, many of those incentives vanish. Your biggest win comes from calling up GM and ordering cars 10,000 at a time, which a new-to-market entrant can't afford to do.