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I wonder how Uber would do if the 2008 financial crisis were to repeat in say, 2022. Tech companies in particular are in for a surprise if a recession of that m
by newfeatureok 7y ago
I wonder how Uber would do if the 2008 financial crisis were to repeat in say, 2022. Tech companies in particular are in for a surprise if a recession of that magnitude happens again.
- nemothekid 7y agoI think a company like Uber would probably do well. The whole gig economy was born out of the 2008 financial crisis
- tmh79 7y agoa lot of the markets they operate in have had large recessions that they have done well in (IE Brazil). Operating theory is that on the margin, (for riders) people decide to own cars less and use alternatives more as cars are expensive and require large upfront costs but things like uber do not and (on the driver side) people have less alternatives to make money (higher paying, more stable jobs with benefits) so the uber driver gig is more appealing and driver acquisition costs are lower.
- three_seagrass 7y agoUber would do well because there would be a flood of people with more free time and looking to make quick cash with their cars.
- benburleson 7y agoIs that good for them? Is there currently a shortage of drivers?
- three_seagrass 7y agoYes, it would be, since it gives them the freedom to drop costs (supply and demand). There doesn't need to be an existing shortage of drivers for this to be beneficial.
- nemothekid 7y ago>Is there currently a shortage of drivers? Most of the money Uber is burning is to recruit drivers. If there are more drivers around, there's less of a reason to burn $100MMs to recruit drivers.
- empath75 7y agoBut they lose money on every ride, and presumably investor money would flee towards business that actually like make a profit.
- three_seagrass 7y agoThey would be able to pay less per ride if there are more supply - i.e. available drivers with existing assets.
- actusual 7y agoThis assumes demand on the rider side is unaffected by an economic downturn, which seems like a strong assumption. Lower demand on the rider side directly impacts top-line revenue, so sure, they may get to pay drivers less, but they are also getting less revenue to pay drivers from.
- cycrutchfield 7y agoThey do not lose money on every ride. Read the earnings report
- Acrobatic_Road 7y ago...and a lot fewer people taking uber rides.
- mathattack 7y agoAnd folks who can’t afford cars.
- ghaff 7y agoI doubt that people who can't afford cars makes up a big percentage of Uber revenues. It's mostly a luxury product.
- threeseed 7y agoUber is diversified between Rides and Eats. And during a recession it has been shown that people eat more fast food. So I imagine overall the business may not be so exposed.
- rconti 7y agoWow. I wouldn't really call that diversification. I mean, I take your point about fast food, but during a recession, it's probably about cheap eats, which Uber Eats is not. And time should be more plentiful, so there's less need for delivery. And UE is a tire fire of a business from these numbers, so that would hardly be a blessing for Uber.
- SyneRyder 7y agoYou'd think that, but it's been fascinating to watch the rise of Uber Eats in Australia. Recession doesn't mean "cheap eats, save a few dollars" as much as "if we sell the car and just use Uber, we save a ton of money on insurance & licensing". There's some data hidden away in the middle of this news story that matches what I've heard elsewhere: Uber Eats is such a huge percentage of restaurant revenue here now, stores can't afford not to be on there anymore (and being on Menulog instead isn't cutting it): Shade Cafe took over from previous tenants, a Greek restaurant, in September last year because 60 per cent of its business was coming through UberEats, and they couldn't justify renting such a big, expensive space. “People aren’t forced to go out," Carey said. "The amount of UberEats coffees we do is amazing, it’s crazy. It’s hard to get people out of the house. https://www.smh.com.au/business/the-economy/the-happy-shops-of-hawthorn-hail-surprise-election-result-20190519-p51oy2.html https://www.smh.com.au/business/the-economy/the-happy-shops-...
- rconti 7y agoWow! My suburb is showing (I own 3 cars :D) I certainly would go carless if I lived in a city, but it hadn't crossed my mind that convenient food delivery could be the tipping point in car ownership vs not. But it makes sense -- as, for many, (commute) transport is solved.
- 7y ago
- rossdavidh 7y agoThey will (not would) die. A financial crisis means at least a temporary pullback in investments, and Uber is not cash-flow positive, so without additional funding they will shut down eventually. I see no reason to believe they ever will be cash-flow positive, unless perhaps they can get self-driving cars to work, and that seems too far off at this point.
- unhashable 7y agoSounds like you did some napkin math, e.g. current war chest and burn rate over the average length of liquidity shock in a downturn?
- xyzzyz 7y agoAll they need to do to be cash-flow positive is to stop trying to get self-driving cars to work and stop trying to invest in their Eats vertical. They already make good money on ride-hailing services.
- rainyMammoth 7y agoAnd if they do so nothing would justify their current market cap. The stocks would be sent tumbling down.
- rossdavidh 7y agoLast I read, which wasn't that long ago, they were profitable in only like five cities in the world, some of which were preparing new regulation to require that they pay their drivers more.
- nerfhammer 7y agoWhy specifically would tech companies "in particular" be in for a surprise?
- rlanday 7y agoThe recession after the 2008 financial crisis was the worst economic downturn in nearly 80 years. We are unlikely to see an event of similar magnitude for several decades.