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> And what we are seeing, for the most part, is that margins matter. Both gross margins and operating margins. No kidding. Of course margin (and cash flow) mat

> And what we are seeing, for the most part, is that margins matter. Both gross margins and operating margins. No kidding. Of course margin (and cash flow) matters. That is the very definition of valuation. The tricky part is timing. Are current margins likely to be the same as future margins? There are some businesses that are investing heavily in their business to grow new categories (e.g. AMZN) or build the network. In those cases, you won’t see strong margin and cash flow early on. Uber is a special case where they are losing money even at scale. Uber is a great idea, but far overvalued by investors like SoftBank. It needs to drop down below $10B. That will also mean laying off most of the employees and raising prices. WeWork is the same. They just got their faster.

sharemywin 7y ago
AWS is a software company masquerading as a retail company. Where it's different from those others is it's selling innovative software services to others.
southerndrift 7y ago
Uber is preparing for a future with self-driving cars. If they are the network to rent those cares, they will make back everything and more. The manufacturers and even the self-driving software won't matter. All that matters is being the app that summons the rides. The network is not as defensible as facebook, but all the other players would have to stick together to dethrone them.
- vkou 7y ago
  What stops me from getting a billion dollars in investor money, developing an Uber-clone app, buying a bunch of self-driving cars, and renting them out as taxis in the top five metro areas in North America? The network is not 'not quite as defensible as Facebook'. The network is not defensible at all. The Uber app adds no unique value to the user. The Uber logo on the cars adds no unique value to the user. If the cars are off-the-shelf self-driving vehicles, then there is no sane reason why anyone would care whether or not they are riding in an Uber, or a Vkouber. It's not like all the hooballaa about licensed and vetted and non-asshole higher-quality drivers is at all relevant in a self-driving car world. The only thing you'll be competing on is price. You know which industry operates this way? The airline industry. And do you know what's the easiest way to have a small fortune? Start with a much larger fortune and invest it into an airline.
  - southerndrift 7y ago
    Nothing is stopping you. But will you retain your market if you are not the biggest network? You need deep enough pockets to get 50% of the market or Uber will get its share back once you try to be profitable since they can leverage their scale.
    - vkou 7y ago
      As an airline passenger, do I care whether or not Alaska, or American has the biggest network? I want to get from point A to point B, as cheaply as possible. If the Alaska flight is the cheapest, I'll take it. If the American flight is the cheapest, I'll take that. I have no brand loyalty for airlines. I have no brand loyalty for taxi companies. Why should I have brand loyalty for taxi-in-an app? How can Uber leverage their scale? Are you saying they are going to price-dump to push me out of a regional market? Isn't that illegal, and something that our esteemed President complains about on a regular basis? I'm not sure 'Become so big, and engage in blatantly anti-consumer monopoly behaviour to the point that you are practically begging to be put on an anti-trust trial' is a great moat to have.
      - southerndrift 7y ago
        The airline argument is quite convincing. How about the frequency and the fair price? It's worthwhile to compare airline rates. It's more difficult for in-app uber purchases that are more frequent for less money. Will people compare rates? Especially if rates are not cheaper elsewhere? The biggest network will have the best cost structure. Uber can keep other companies alive by slightly rising their prices. So no monopoly problem but nobody who has the money to innovate. Then they have the money for the most advanced technology and by adjusting their prices they decide how big their market share is.
        vkou 7y ago
        > How about the frequency and the fair price? The case looks even worse for Uber, than it does for Alaskan in that case. The capital costs and logistics of getting more airplanes, more (highly limited!) slots at airport terminals, working this out for point-to-point connections, getting all your staff moving from flight to flight efficiently, are horrific. The capital costs and logistics of scaling up a self-driving taxi network, in comparison, are peanuts. > It's more difficult for in-app uber purchases that are more frequent for less money. It's a simple as checking the ride price in two apps. > The biggest network will have the best cost structure. No, the network with the lowest profit margins will have the best cost structure. Uber will either be a defensible business, or a profitable, but entirely indefensible one.

sharemywin 7y ago

AWS is a software company masquerading as a retail company. Where it's different from those others is it's selling innovative software services to others.

southerndrift 7y ago

Uber is preparing for a future with self-driving cars. If they are the network to rent those cares, they will make back everything and more. The manufacturers and even the self-driving software won't matter. All that matters is being the app that summons the rides. The network is not as defensible as facebook, but all the other players would have to stick together to dethrone them.

vkou 7y ago
What stops me from getting a billion dollars in investor money, developing an Uber-clone app, buying a bunch of self-driving cars, and renting them out as taxis in the top five metro areas in North America? The network is not 'not quite as defensible as Facebook'. The network is not defensible at all. The Uber app adds no unique value to the user. The Uber logo on the cars adds no unique value to the user. If the cars are off-the-shelf self-driving vehicles, then there is no sane reason why anyone would care whether or not they are riding in an Uber, or a Vkouber. It's not like all the hooballaa about licensed and vetted and non-asshole higher-quality drivers is at all relevant in a self-driving car world. The only thing you'll be competing on is price. You know which industry operates this way? The airline industry. And do you know what's the easiest way to have a small fortune? Start with a much larger fortune and invest it into an airline.
- southerndrift 7y ago
  Nothing is stopping you. But will you retain your market if you are not the biggest network? You need deep enough pockets to get 50% of the market or Uber will get its share back once you try to be profitable since they can leverage their scale.
  - vkou 7y ago
    As an airline passenger, do I care whether or not Alaska, or American has the biggest network? I want to get from point A to point B, as cheaply as possible. If the Alaska flight is the cheapest, I'll take it. If the American flight is the cheapest, I'll take that. I have no brand loyalty for airlines. I have no brand loyalty for taxi companies. Why should I have brand loyalty for taxi-in-an app? How can Uber leverage their scale? Are you saying they are going to price-dump to push me out of a regional market? Isn't that illegal, and something that our esteemed President complains about on a regular basis? I'm not sure 'Become so big, and engage in blatantly anti-consumer monopoly behaviour to the point that you are practically begging to be put on an anti-trust trial' is a great moat to have.
    - southerndrift 7y ago
      The airline argument is quite convincing. How about the frequency and the fair price? It's worthwhile to compare airline rates. It's more difficult for in-app uber purchases that are more frequent for less money. Will people compare rates? Especially if rates are not cheaper elsewhere? The biggest network will have the best cost structure. Uber can keep other companies alive by slightly rising their prices. So no monopoly problem but nobody who has the money to innovate. Then they have the money for the most advanced technology and by adjusting their prices they decide how big their market share is.
      - vkou 7y ago
        > How about the frequency and the fair price? The case looks even worse for Uber, than it does for Alaskan in that case. The capital costs and logistics of getting more airplanes, more (highly limited!) slots at airport terminals, working this out for point-to-point connections, getting all your staff moving from flight to flight efficiently, are horrific. The capital costs and logistics of scaling up a self-driving taxi network, in comparison, are peanuts. > It's more difficult for in-app uber purchases that are more frequent for less money. It's a simple as checking the ride price in two apps. > The biggest network will have the best cost structure. No, the network with the lowest profit margins will have the best cost structure. Uber will either be a defensible business, or a profitable, but entirely indefensible one.