4 ms·

That is not a fair characterization of the discourse. There are a lot of people arguing that "platforms" like Uber are capturing too large a fraction of the ec

That is not a fair characterization of the discourse. There are a lot of people arguing that "platforms" like Uber are capturing too large a fraction of the economic surplus created by transactions on the platform. 30% for matching buy/sell orders? Do you have any idea how insane that is relative to what NYSE charges?

sgustard 6y ago
How would those people have found steady income driving strangers every day without Uber? My mind draws a blank. Uber does not have a monopoly like a stock market. If there's a more effecient way to do this, competitors will find it.
- asdff 6y ago
  They would have picked up another job or shift rather than work rideshare. The whole appeal was this was something you can do for some beer money once a week, but now people who would have been working 2 jobs are working 1 job and ubering, and given you are operating your own vehicle, I'm not sure how much you actually make relative to picking up a second shift at taco bell. Honestly, transit is a tough nut to make profit on. Pacific Electrics red cars in LA failed to make a profit and folded. All the private railways in NYC failed to make a profit even during the days when people had to either take a train or walk, and still folded (these bankrupt companies were bought up cheap publicly and became the mta) Public transit looses money just like highways do, but all of this is justified because the gain is realized in other sectors of the economy. However, uber and lyft are private companies and don't benefit from general gain in other sectors, so in my mind these companies have an expiration date once vc investors finally open a history book.
MattGaiser 6y ago
Except that is what such a system costs a the price the market will pay. Uber doesn’t make money. It is only insane if it can be done for cheaper.
- rmrfstar 6y ago
  Weird. That's exactly what stock exchanges said before Reg NMS forced them to route orders to each other. One way of getting drivers more money is to de-fragment these marketplaces through compulsory order routing rules.
- Nextgrid 6y ago
  The reason Uber is not profitable is because most of the revenue is being pissed away in marketing, advertising and similar. NYSE is built to much stricter specifications; if they can pull it off there's no reason Uber can't do it given their less demanding requirements.
  - Spivak 6y ago
    Why are you assuming that advertising and marketing have a net negative value? Because we're at the point where every company is laser focused on their marketing departments and desperately trying to reduce their ad spend. If companies could just not then you need to explain why apparently everyone is putting their money into something obviously unprofitable.
    - ac29 6y ago
      In the case of Uber, "marketing" is often just direct or indirect subsidies of pricing (aka, selling $1 for $0.50). Its a questionable business model, though it appears to have worked for them to some degree, the rides segment of their business doesnt seem to be as reliant on that spend as it used to be, and is actually profitable.
    - Nextgrid 6y ago
      First of all I think it's a net negative value for society; the world is already drowning in advertising and we don't need more of it. If I'm paying for something the last thing I want is for part of that money to go towards annoying other people that haven't asked for anything with ads for a service that might not be relevant to them (plus in the case of Uber their brand is pretty much a household name at this point). I also think it's an unsustainable business model; even if you do all things perfectly, there are people out there that might be aware of Uber but will still not be using it for various reasons, so over time the payoff from marketing will still be decreasing. If your business is only sustainable because of marketing then over time, all other factors remaining equal, your profitability will still be declining. > If companies could just not then you need to explain why apparently everyone is putting their money into something obviously unprofitable. If every company chose not to do it then we'd all be better off. But since one company does it, the others have to follow otherwise they'd be left behind. There's also the issue of attributing the profitability of ad spending; a lot of companies spend ad dollars without exactly knowing whether it's actually bringing in revenue (if I search for brand X on Google, they'd be the first hit, but then they also put ads up there, if a person clicks the ad it counts as a conversion and Google gets paid, but was that a true conversion or would the user have clicked on the non-sponsored link had the ad not been there?). When a company allocates budget for marketing the marketing team will usually spend it all and produce results to justify their own paychecks/pay rises/bonuses and yet those results might not be "true" due to the aforementioned issue for example.
catern 6y ago
Interesting question about the pricing relative to NYSE. There are many intermediaries between a customer and NYSE which have historically had pretty high fees which are all getting taken by Uber in this case. Those fees (and corrupt business practices) were eliminated by electronic trading, increasing competition, and high frequency trading. And exchanges such as NYSE themselves only lowered their fees in response to competitor exchanges (there are 13 right now in the US, with 3 more launching this year), which is an obvious way to improve things. So I'd say the difference is the lack of competition in general. I guess one obvious reason for lack of competition is network effects. The intermediaries in the stock market at least allowed for a layer of abstraction that could be swapped around without that being visible to the customer. So, a fairly obvious conclusion in the end: The fact that the exchange component and the end user interface are bundled together reduces competition and keeps these prices high. I'm sure eventually someone will figure out a clever way to make an independent UI that abstracts over Uber/Lyft/etc despite none of them wanting that, and that should introduce a lot more competition and lower prices.
- deleted 6y ago
  [deleted]
dongvsascript 6y ago
the difference is in the details. what you say is incredibly hard. they set up a global service in thousands of legal jurisdictions that let's you use one app. in rome you can only legally get a black mercedes qualified as a limo. in dubai you can order a lexus taxi or an uber helicopter. in chicago anyone with a car can be an uber. in moscow they have to go through yandex taxi. to me, in any city with all its different rules, I pop open an app, order what i want, and it just gets charged to my amex. they handle insurance rules, they handle refunds and disputes, they provide mapping software drivers use - worldwide, so you can look at your route and not get ripped off by a cabbie. they provide car leasing services to drivers like a dealership. this is an insanely complex feat to accomplish. it's also expensive. what does a taxi service do? it's a guy sitting at dispatch assigning calls to cabs. the stock exchange is complex too. not nearly as complex, with much more well-defined and common rules. but even they don't just charge you. they also charge listing fees, regulatory fees, governance, access to data fees, and sell services and software for trading. you are also comparing a trade transaction to a cab ride. sorry, a cab ride is a much bigger and more involved thing than a button you click on a website.
- rmrfstar 6y ago
  You make a good point. NYSE fees do not represent the full cost of intermediation for cash equities. But my core point remains: the cost of intermediation in the financial sector is 1-2 orders of magnitude lower than 30%. I don't think you are making your complexity argument in good faith. It is ridiculous to suggest that Uber's order matching and payment infrastructure is more complex than the full chain of financial intermediation, from order matching through clearing, settlement, and custody.
  - dongvsascript 6y ago
    i think you completely ignoring the main point i detailed out, that order matching is a tiny part of what uber does, is what is not in good faith. it's a company with 4 million workers in most countries and cities worldwide. let's say you want to start a taxi company in tokyo. find and hire about a thousand drivers. your costs are just writing an app, right? how about saudi arabia? now take those costs and multiply by 4000. you want to compare to nyse? cool. ask them how much money it will take to trade every stock worldwide following local rules, for any country's citizen. hire 4 million workers. make sure i can use the same app for every transaction and just put it on my amex.
tathougies 6y ago
> 30% for matching buy/sell orders? Do you have any idea how insane that is relative to what NYSE charges? I imagine the pricing is relative to the scarcity and difficult of matching buy/sell orders. Given that NYSE is a national network, that can meet supply and demand instantly between any two individuals in the world, it's substantially different than the much scarcer order-matching reality that a service like Uber would operate in. TO fulfill an Uber order for a particular interested buyer involves a much smaller set of potential sellers than the NYSE. Thus, it would stand to reason that Uber gets a larger cut than the NYSE. If all Uber did was find a car for your somewhere in the world, that would make it much cheaper. Of course, an uber user is paying to find a car a few minutes away. If NYSE had the additional burden of having to find a physical person near you to exchange stock certificates, you'd expect a higher premium, and indeed, when this paper exchange of certificates was any kind of reality, the NYSE's prices were higher.
- rmrfstar 6y ago
  Let's say the US introduced a rule that required Uber to route an order to any "venue" with a "better" price. Litigate the details of "better" and "venue" later. Do you seriously believe that no venue would pop up that yields the driver >70% of the trade price, allowing them to bid lower overall? This is exactly what the SEC did with Reg NMS and transaction costs declined precipitously.
  - saddlerustle 6y ago
    > This is exactly what the SEC did with Reg NMS and transaction costs declined precipitously. Citation needed - correlation is not causation. The research on this is mixed and plenty of people argue Reg NMS has increased transaction costs and reduced liquidity. It mostly acts as a subsidy to poorly run exchanges, and indeed the most efficient exchanges and the most liquid markets in some global products are now in Europe.
    - deleted 6y ago
      [deleted]

sgustard 6y ago

How would those people have found steady income driving strangers every day without Uber? My mind draws a blank. Uber does not have a monopoly like a stock market. If there's a more effecient way to do this, competitors will find it.

asdff 6y ago
They would have picked up another job or shift rather than work rideshare. The whole appeal was this was something you can do for some beer money once a week, but now people who would have been working 2 jobs are working 1 job and ubering, and given you are operating your own vehicle, I'm not sure how much you actually make relative to picking up a second shift at taco bell. Honestly, transit is a tough nut to make profit on. Pacific Electrics red cars in LA failed to make a profit and folded. All the private railways in NYC failed to make a profit even during the days when people had to either take a train or walk, and still folded (these bankrupt companies were bought up cheap publicly and became the mta) Public transit looses money just like highways do, but all of this is justified because the gain is realized in other sectors of the economy. However, uber and lyft are private companies and don't benefit from general gain in other sectors, so in my mind these companies have an expiration date once vc investors finally open a history book.

MattGaiser 6y ago

Except that is what such a system costs a the price the market will pay. Uber doesn’t make money. It is only insane if it can be done for cheaper.

rmrfstar 6y ago
Weird. That's exactly what stock exchanges said before Reg NMS forced them to route orders to each other. One way of getting drivers more money is to de-fragment these marketplaces through compulsory order routing rules.
Nextgrid 6y ago
The reason Uber is not profitable is because most of the revenue is being pissed away in marketing, advertising and similar. NYSE is built to much stricter specifications; if they can pull it off there's no reason Uber can't do it given their less demanding requirements.
- Spivak 6y ago
  Why are you assuming that advertising and marketing have a net negative value? Because we're at the point where every company is laser focused on their marketing departments and desperately trying to reduce their ad spend. If companies could just not then you need to explain why apparently everyone is putting their money into something obviously unprofitable.
  - ac29 6y ago
    In the case of Uber, "marketing" is often just direct or indirect subsidies of pricing (aka, selling $1 for $0.50). Its a questionable business model, though it appears to have worked for them to some degree, the rides segment of their business doesnt seem to be as reliant on that spend as it used to be, and is actually profitable.
  - Nextgrid 6y ago
    First of all I think it's a net negative value for society; the world is already drowning in advertising and we don't need more of it. If I'm paying for something the last thing I want is for part of that money to go towards annoying other people that haven't asked for anything with ads for a service that might not be relevant to them (plus in the case of Uber their brand is pretty much a household name at this point). I also think it's an unsustainable business model; even if you do all things perfectly, there are people out there that might be aware of Uber but will still not be using it for various reasons, so over time the payoff from marketing will still be decreasing. If your business is only sustainable because of marketing then over time, all other factors remaining equal, your profitability will still be declining. > If companies could just not then you need to explain why apparently everyone is putting their money into something obviously unprofitable. If every company chose not to do it then we'd all be better off. But since one company does it, the others have to follow otherwise they'd be left behind. There's also the issue of attributing the profitability of ad spending; a lot of companies spend ad dollars without exactly knowing whether it's actually bringing in revenue (if I search for brand X on Google, they'd be the first hit, but then they also put ads up there, if a person clicks the ad it counts as a conversion and Google gets paid, but was that a true conversion or would the user have clicked on the non-sponsored link had the ad not been there?). When a company allocates budget for marketing the marketing team will usually spend it all and produce results to justify their own paychecks/pay rises/bonuses and yet those results might not be "true" due to the aforementioned issue for example.

catern 6y ago

Interesting question about the pricing relative to NYSE. There are many intermediaries between a customer and NYSE which have historically had pretty high fees which are all getting taken by Uber in this case. Those fees (and corrupt business practices) were eliminated by electronic trading, increasing competition, and high frequency trading. And exchanges such as NYSE themselves only lowered their fees in response to competitor exchanges (there are 13 right now in the US, with 3 more launching this year), which is an obvious way to improve things. So I'd say the difference is the lack of competition in general. I guess one obvious reason for lack of competition is network effects. The intermediaries in the stock market at least allowed for a layer of abstraction that could be swapped around without that being visible to the customer. So, a fairly obvious conclusion in the end: The fact that the exchange component and the end user interface are bundled together reduces competition and keeps these prices high. I'm sure eventually someone will figure out a clever way to make an independent UI that abstracts over Uber/Lyft/etc despite none of them wanting that, and that should introduce a lot more competition and lower prices.

deleted 6y ago
[deleted]

dongvsascript 6y ago

the difference is in the details. what you say is incredibly hard. they set up a global service in thousands of legal jurisdictions that let's you use one app. in rome you can only legally get a black mercedes qualified as a limo. in dubai you can order a lexus taxi or an uber helicopter. in chicago anyone with a car can be an uber. in moscow they have to go through yandex taxi. to me, in any city with all its different rules, I pop open an app, order what i want, and it just gets charged to my amex. they handle insurance rules, they handle refunds and disputes, they provide mapping software drivers use - worldwide, so you can look at your route and not get ripped off by a cabbie. they provide car leasing services to drivers like a dealership. this is an insanely complex feat to accomplish. it's also expensive. what does a taxi service do? it's a guy sitting at dispatch assigning calls to cabs. the stock exchange is complex too. not nearly as complex, with much more well-defined and common rules. but even they don't just charge you. they also charge listing fees, regulatory fees, governance, access to data fees, and sell services and software for trading. you are also comparing a trade transaction to a cab ride. sorry, a cab ride is a much bigger and more involved thing than a button you click on a website.

rmrfstar 6y ago
You make a good point. NYSE fees do not represent the full cost of intermediation for cash equities. But my core point remains: the cost of intermediation in the financial sector is 1-2 orders of magnitude lower than 30%. I don't think you are making your complexity argument in good faith. It is ridiculous to suggest that Uber's order matching and payment infrastructure is more complex than the full chain of financial intermediation, from order matching through clearing, settlement, and custody.
- dongvsascript 6y ago
  i think you completely ignoring the main point i detailed out, that order matching is a tiny part of what uber does, is what is not in good faith. it's a company with 4 million workers in most countries and cities worldwide. let's say you want to start a taxi company in tokyo. find and hire about a thousand drivers. your costs are just writing an app, right? how about saudi arabia? now take those costs and multiply by 4000. you want to compare to nyse? cool. ask them how much money it will take to trade every stock worldwide following local rules, for any country's citizen. hire 4 million workers. make sure i can use the same app for every transaction and just put it on my amex.

tathougies 6y ago

> 30% for matching buy/sell orders? Do you have any idea how insane that is relative to what NYSE charges? I imagine the pricing is relative to the scarcity and difficult of matching buy/sell orders. Given that NYSE is a national network, that can meet supply and demand instantly between any two individuals in the world, it's substantially different than the much scarcer order-matching reality that a service like Uber would operate in. TO fulfill an Uber order for a particular interested buyer involves a much smaller set of potential sellers than the NYSE. Thus, it would stand to reason that Uber gets a larger cut than the NYSE. If all Uber did was find a car for your somewhere in the world, that would make it much cheaper. Of course, an uber user is paying to find a car a few minutes away. If NYSE had the additional burden of having to find a physical person near you to exchange stock certificates, you'd expect a higher premium, and indeed, when this paper exchange of certificates was any kind of reality, the NYSE's prices were higher.

rmrfstar 6y ago
Let's say the US introduced a rule that required Uber to route an order to any "venue" with a "better" price. Litigate the details of "better" and "venue" later. Do you seriously believe that no venue would pop up that yields the driver >70% of the trade price, allowing them to bid lower overall? This is exactly what the SEC did with Reg NMS and transaction costs declined precipitously.
- saddlerustle 6y ago
  > This is exactly what the SEC did with Reg NMS and transaction costs declined precipitously. Citation needed - correlation is not causation. The research on this is mixed and plenty of people argue Reg NMS has increased transaction costs and reduced liquidity. It mostly acts as a subsidy to poorly run exchanges, and indeed the most efficient exchanges and the most liquid markets in some global products are now in Europe.
  - deleted 6y ago
    [deleted]