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Uber / Lyft / Snap were never cash flow positive, and don't have any clear way of reaching that, while User is burning 2 billions a quarter and has only two mor

Uber / Lyft / Snap were never cash flow positive, and don't have any clear way of reaching that, while User is burning 2 billions a quarter and has only two more quarters to go bust. There are tons of VC unicorns which are burning investors money on unsustainable business models, like food delivery apps that subsidize your orders. WeWork has no chance of avoiding bankrupcy. The irrational exuberence has been here for quite some time already, and out of everything, a bankrupt company which at least used to have a working business model and existed for 100 years is not nearly the most insane investments going on here. (The insanity is buying it before the bankruptcy restructuring, tho).

wpietri 6y ago
Agreed. The thing that seems especially bonkers to me is that the theory of Uber is that you could turn a low-margin business into a high-margin business by a) shifting most of your risk (opex, capex, labor costs) to low wage workers too desperate to negotiate a fair deal, and b) spending massively to get Google-ish monopoly pricing over a key activity. Point A is looking more and more false. Uber took on a lot of costs; instead of running a very lean operation, they spent like a tech company. They're having a hard time weathering this downturn. Governments are catching up to them on their labor-isn't-labor regulatory arbitrage, and I expect that come 2021, they'll see national-scale questions about their worker exploitation. Point B is looking even worse. Once they failed to kill Lyft, extracting monopoly rents went out the window. And now a bunch of well-funded organizations with strong brands are coming after their business with autonomous cars. It won't be easy competing with Google on software. It won't be easy competing with GM on cars. And plenty of companies have brands compatible with becoming a preferred transportation provider. E.g., imagine BMW's autonomous car service. Or even worse from Uber's perspective, Costco. That's something like a quarter of American households. It's perfectly plausible to me that Uber will never hit breakeven in terms of total profit exceeding total investment. By 2040, they could be in the same bucket as Groupon: an early darling that still exists but people barely remember.
- flashyfaffe2 6y ago
  Everything being equal,isn't what Amazon did before anyone else? Burning astonishing amount of cash and create a massive monopoly. Prof Galloway, gave very interesting thoughts: https://www.profgalloway.com/wewtf https://www.profgalloway.com/wewtf
  - postingawayonhn 6y ago
    Amazon remains very price competitive. For Uber to make a profit they need to raise prices to cover all their operational expenses. Traditional taxi companies can remain viable at lower prices due to their lower operational spending.
  - wpietri 6y ago
    I don't think so. Per Crunchbase, Amazon only took $108 million in investment. Uber took $8 billion. Although I have plenty of issues with Amazon's behavior, I think they earned their market dominance the hard way.
    - rauchp 6y ago
      Amazon has been raising money though bonds for a while now, though. They even recently raised $10 billion in bonds at a crazy low rate. https://markets.businessinsider.com/news/stocks/amazon-raised-10-billion-through-record-low-borrowing-costs-2020-6-1029272938 https://markets.businessinsider.com/news/stocks/amazon-raise...
      - wpietri 6y ago
        Fair point. Although I think Amazon is doing that based not on speculation about the possibility of gaining market dominance, but because they already have it. The fact that it's bonds and not venture funding is a sign.
  - sukilot 6y ago
    Retail shopping had incredible inefficiencies and economies of scale that a personal chauffer doesn't have.
- flashyfaffe2 6y ago
  Everything being equal,isn't what Amazon did before anyone else? Burning astonishing amount of cash and create a massive monopoly. Prof Galloway, gave very interesting thoughts on similar approach followed by WeWork https://www.profgalloway.com/wewtf https://www.profgalloway.com/wewtf
theelfismike 6y ago
The Entire Economy Is MoviePass Now. Enjoy It While You Can. https://www.nytimes.com/2018/05/16/technology/moviepass-economy-startups.html https://www.nytimes.com/2018/05/16/technology/moviepass-econ...
WA 6y ago
Still, with Uber, it is the bubble OP described as "the future is different". Hertz stock is just like the Bitcoin bubble: trying to find a greater fool.
deleted 6y ago
[deleted]
rreichman 6y ago
This is silly. Snap's free cash flow is constantly growing and was close to zero the past quarter. Uber & Lyft are generally profitable on rides and with a bit more scale will be GAAP profitable.
- asdff 6y ago
  Do you have a source on uber and lyft? Genuinely curious to be more informed on the topic as I've heard the opposite more often.

wpietri 6y ago

Agreed. The thing that seems especially bonkers to me is that the theory of Uber is that you could turn a low-margin business into a high-margin business by a) shifting most of your risk (opex, capex, labor costs) to low wage workers too desperate to negotiate a fair deal, and b) spending massively to get Google-ish monopoly pricing over a key activity. Point A is looking more and more false. Uber took on a lot of costs; instead of running a very lean operation, they spent like a tech company. They're having a hard time weathering this downturn. Governments are catching up to them on their labor-isn't-labor regulatory arbitrage, and I expect that come 2021, they'll see national-scale questions about their worker exploitation. Point B is looking even worse. Once they failed to kill Lyft, extracting monopoly rents went out the window. And now a bunch of well-funded organizations with strong brands are coming after their business with autonomous cars. It won't be easy competing with Google on software. It won't be easy competing with GM on cars. And plenty of companies have brands compatible with becoming a preferred transportation provider. E.g., imagine BMW's autonomous car service. Or even worse from Uber's perspective, Costco. That's something like a quarter of American households. It's perfectly plausible to me that Uber will never hit breakeven in terms of total profit exceeding total investment. By 2040, they could be in the same bucket as Groupon: an early darling that still exists but people barely remember.

flashyfaffe2 6y ago
Everything being equal,isn't what Amazon did before anyone else? Burning astonishing amount of cash and create a massive monopoly. Prof Galloway, gave very interesting thoughts: https://www.profgalloway.com/wewtf https://www.profgalloway.com/wewtf
- postingawayonhn 6y ago
  Amazon remains very price competitive. For Uber to make a profit they need to raise prices to cover all their operational expenses. Traditional taxi companies can remain viable at lower prices due to their lower operational spending.
- wpietri 6y ago
  I don't think so. Per Crunchbase, Amazon only took $108 million in investment. Uber took $8 billion. Although I have plenty of issues with Amazon's behavior, I think they earned their market dominance the hard way.
  - rauchp 6y ago
    Amazon has been raising money though bonds for a while now, though. They even recently raised $10 billion in bonds at a crazy low rate. https://markets.businessinsider.com/news/stocks/amazon-raised-10-billion-through-record-low-borrowing-costs-2020-6-1029272938 https://markets.businessinsider.com/news/stocks/amazon-raise...
    - wpietri 6y ago
      Fair point. Although I think Amazon is doing that based not on speculation about the possibility of gaining market dominance, but because they already have it. The fact that it's bonds and not venture funding is a sign.
- sukilot 6y ago
  Retail shopping had incredible inefficiencies and economies of scale that a personal chauffer doesn't have.
flashyfaffe2 6y ago
Everything being equal,isn't what Amazon did before anyone else? Burning astonishing amount of cash and create a massive monopoly. Prof Galloway, gave very interesting thoughts on similar approach followed by WeWork https://www.profgalloway.com/wewtf https://www.profgalloway.com/wewtf

theelfismike 6y ago

The Entire Economy Is MoviePass Now. Enjoy It While You Can. https://www.nytimes.com/2018/05/16/technology/moviepass-economy-startups.html https://www.nytimes.com/2018/05/16/technology/moviepass-econ...

WA 6y ago

Still, with Uber, it is the bubble OP described as "the future is different". Hertz stock is just like the Bitcoin bubble: trying to find a greater fool.

deleted 6y ago

[deleted]

rreichman 6y ago

This is silly. Snap's free cash flow is constantly growing and was close to zero the past quarter. Uber & Lyft are generally profitable on rides and with a bit more scale will be GAAP profitable.

asdff 6y ago
Do you have a source on uber and lyft? Genuinely curious to be more informed on the topic as I've heard the opposite more often.