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It's worth being skeptical, but it seems to me that people who criticise do so without having any idea how the business internally operates or what its goals an

It's worth being skeptical, but it seems to me that people who criticise do so without having any idea how the business internally operates or what its goals and expectations are - and it seems like on falsely based assumptions. "Burning" cash is already an unfair term which to me implies that analysis is not founded on fair terms. How can you tell they are "burning" cash and not "investing" it in r&d and expansion which will have effect in the future? If you can differentiate between the two and bring forth a solid reason why it's actually burning, not investing in itself, I might think there's some truth to it. Certainly there are viable conditions in which it's possible to invest $1B in itself, right? You could certainly prove that with maths, if for example this $1B spent now will mean maybe $1B extra revenue after 5 years? > They have lost more money so far than any startup in recent history How can that be an argument? How can you tell it isn't "They have invested more money so far than any startup in recent history"?

arcticbull 7y ago
For what it's worth I'd really recommend reading the Naked Capitalism write-up I linked to, as I do agree with their assessments broadly, but tldr: 1. There's no economy of scale in moving people from place to place in town. If there was it's likely we'd have national taxi companies by now. In fact, taxi companies recognize better unit economics than an Uber does because they pool their fleet leases and insurance, which not every Uber driver is interested in (or even offered). 2. Starting from a higher cost basis than a taxi means that people would have to pay more than a taxi for a profitable Uber company to exist. There's no evidence people are willing to pay as much as a taxi for their day to day transportation, let alone more than a taxi costs. 3. There's no consumer loyalty so margins are likely to remain razor thin in a race to the bottom commodity product -- only competitive against their incumbents (taxis) when priced at below the cost to deliver. 4. Unlike other startups which sell zero marginal cost products, Uber is selling a negative margin product at scale. There's no clear path toward meaningful margin expansion no matter what scale of ridership Uber achieves. Or alternatively, if it's not possible to eek out a profit off the back of $65B in rides per year in peak economic conditions as of Q4 2019, how many more rides can you possibly require to turn a profit? Let alone pay back your investors/debt holders $20B of capital. It's a crap business model, it was crap when they went public with an $85B market cap, and it's crap today with a $50B market cap. They're trading with a market cap of just 2.5X their VC investment -- think about that! You can justify a 5X valuation on your personal savings account when you take out a mortgage.
- mewpmewp2 7y ago
  These are good arguments, so it comes down to the question whether this type of business could be profitable in the first place. As a frequent user of these services I would be fine with paying a bit more. What I most enjoy is the ability to get a ride within 1 minute timeframe and very comfortably through the app. Ideal to not lose any daily time when going to work and back. Taxis require more organising and waiting time. There is definite value for me. Are there enough other people who find value in this? I am not sure, but we definitely will find out. Do you think Uber blindly believes they can ask customer's more money or reduce their costs or are they deceitful? Regarding starting from higher price point. This seems like a solvable issue. I in general don't think we need specialist drivers or so called taxi to exist unless for niche crowds. It seems a lot more optimal if most people can go in and out when they want and do it. This must be cheaper and optimal due to scale and algorithms ability to select fitting driver's from a huge pool. One thing unnoted is though future potential for self driving transport. Right now I will be long on Uber though. My life has gotten so much easier with ride hailing services (I don't have a car and I find it cheaper to ride hail than to maintain a car anyway) so it definitely makes sense for me to invest in them.
  - arcticbull 7y ago
    > I in general don't think we need specialist drivers or so called taxi to exist unless for niche crowds. It seems a lot more optimal if most people can go in and out when they want and do it. This must be cheaper and optimal due to scale and algorithms ability to select fitting driver's from a huge pool. Cars are idle 99% of the time because individuals who just wanna jump in and make a few extra bucks are at work during the day. I don't think Uber even pretends to have an ad-hoc fleet of anything other than professional drivers. > One thing unnoted is though future potential for self driving transport. That'll be so much worse for Uber. At best, if they deliver it first, they'll see a temporary first-mover advantage. Then every other automaker in the world will jump into the fray, and likely individuals won't own cars at all and it'll be either more commoditized (or less so) depending on what kind of ride people want. The automakers may even cut Uber out -- why sell to their competition? I don't think it's a margin improvement play but an existential threat.

arcticbull 7y ago

For what it's worth I'd really recommend reading the Naked Capitalism write-up I linked to, as I do agree with their assessments broadly, but tldr: 1. There's no economy of scale in moving people from place to place in town. If there was it's likely we'd have national taxi companies by now. In fact, taxi companies recognize better unit economics than an Uber does because they pool their fleet leases and insurance, which not every Uber driver is interested in (or even offered). 2. Starting from a higher cost basis than a taxi means that people would have to pay more than a taxi for a profitable Uber company to exist. There's no evidence people are willing to pay as much as a taxi for their day to day transportation, let alone more than a taxi costs. 3. There's no consumer loyalty so margins are likely to remain razor thin in a race to the bottom commodity product -- only competitive against their incumbents (taxis) when priced at below the cost to deliver. 4. Unlike other startups which sell zero marginal cost products, Uber is selling a negative margin product at scale. There's no clear path toward meaningful margin expansion no matter what scale of ridership Uber achieves. Or alternatively, if it's not possible to eek out a profit off the back of $65B in rides per year in peak economic conditions as of Q4 2019, how many more rides can you possibly require to turn a profit? Let alone pay back your investors/debt holders $20B of capital. It's a crap business model, it was crap when they went public with an $85B market cap, and it's crap today with a $50B market cap. They're trading with a market cap of just 2.5X their VC investment -- think about that! You can justify a 5X valuation on your personal savings account when you take out a mortgage.

mewpmewp2 7y ago
These are good arguments, so it comes down to the question whether this type of business could be profitable in the first place. As a frequent user of these services I would be fine with paying a bit more. What I most enjoy is the ability to get a ride within 1 minute timeframe and very comfortably through the app. Ideal to not lose any daily time when going to work and back. Taxis require more organising and waiting time. There is definite value for me. Are there enough other people who find value in this? I am not sure, but we definitely will find out. Do you think Uber blindly believes they can ask customer's more money or reduce their costs or are they deceitful? Regarding starting from higher price point. This seems like a solvable issue. I in general don't think we need specialist drivers or so called taxi to exist unless for niche crowds. It seems a lot more optimal if most people can go in and out when they want and do it. This must be cheaper and optimal due to scale and algorithms ability to select fitting driver's from a huge pool. One thing unnoted is though future potential for self driving transport. Right now I will be long on Uber though. My life has gotten so much easier with ride hailing services (I don't have a car and I find it cheaper to ride hail than to maintain a car anyway) so it definitely makes sense for me to invest in them.
- arcticbull 7y ago
  > I in general don't think we need specialist drivers or so called taxi to exist unless for niche crowds. It seems a lot more optimal if most people can go in and out when they want and do it. This must be cheaper and optimal due to scale and algorithms ability to select fitting driver's from a huge pool. Cars are idle 99% of the time because individuals who just wanna jump in and make a few extra bucks are at work during the day. I don't think Uber even pretends to have an ad-hoc fleet of anything other than professional drivers. > One thing unnoted is though future potential for self driving transport. That'll be so much worse for Uber. At best, if they deliver it first, they'll see a temporary first-mover advantage. Then every other automaker in the world will jump into the fray, and likely individuals won't own cars at all and it'll be either more commoditized (or less so) depending on what kind of ride people want. The automakers may even cut Uber out -- why sell to their competition? I don't think it's a margin improvement play but an existential threat.