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Why Uber's business model is doomed

73 points by donsupreme 6y ago

yalogin 6y ago
At least over the last 2 yrs I was saying that Uber and Lyft should get out of the self driving tech business. Its not who they are, and there is no reason to invest in it when they could easily consume the best tech out there when it becomes available. I now feel even more strongly so. In fact it feels like these companies might themselves be re-evaluating their priorities at this point. I see absolutely no reason to invest in FSD themselves other than to attract talent. They should instead accept that their value to the world is they unified the taxi system and turned it into a global service that drivers can use. They should focus on their core business and figure out their issues with drivers and employees. They could cut the FSD costs and instead partner with Google or some other company. Or they could wait and also partner with any other car manufacturer out there that gets to FSD market. These companies could be huge buyers of the tech when available and so auto manufacturers will fall over themselves to get their business. I wouldn't say its doomed though.
- evgen 6y ago
  If FSD had actually turned out to be as easy as some people were suggesting 5+ years ago then there is no way Uber or Lyft could avoid playing in that game; the first company who could mass-produce FSD vehicles would be able to replace Uber/Lyft with no difficulty at all. Once it became apparent that the 'any day now' BS from Musk et al was a lie then both companies should have dropped any efforts in this direction immediately.
  - arcticbull 6y ago
    An MIT study indicated developing their own FSD technology would yield at most a small margin improvement because the technology wouldn't be exclusive for long, and shortly after it would be utterly commodity. [1] [1] https://www.businessinsider.com/uber-lyft-self-driving-taxis-may-not-help-profitability-mit-2019-5 https://www.businessinsider.com/uber-lyft-self-driving-taxis...
  - oblib 6y ago
    I agree. FSD is far more complex than even Musk imagined (or at least has portrayed) and while I'm very impressed with what's been done in that field I'd never use it in the real world.
rrivers 6y ago
About a year ago I penned a short essay about this exact subject. Central argument is that Uber is the type of organization that should be open to public ownership given that there is no road to profitability for them. Since writing, states like CA have taken firmer stances on gig economy workers and employment status. The alternative is that Uber continues to try and find avenues of financialization instead of continuing to experiment and innovate with their core service model. Article Link: https://medium.com/swlh/socializing-uber-for-society-shareholders-5cc4a27d28d4?source=friends_link&sk=8a819492253bd3e990b845861f8f32fc https://medium.com/swlh/socializing-uber-for-society-shareho...
lacker 6y ago
It's too bad that this whole article never touches on the basics of Uber's business model, like how much money they lose on each ride, how much funding they have to ride out the current economic climate, the crazy fact that Uber Eats is now a larger part of Uber's American business than the drive-me-somewhere Uber business, and so on. I don't see how Uber's business model is doomed. If Uber and Lyft are forced to be less efficient, they will raise prices. Yes, their business would shrink. But how could they be forced out of business entirely - would people go back to using taxis?? At the very least, Uber could charge the same price as taxis and be superior to taxis because an Uber actually shows up when you want one.
- arcticbull 6y ago
  I recommend the Naked Capitalism series on Uber's economics. [1] It's a 23-part series that goes back years, but the most recent one I linked you from a few months ago should be a good starting point. "Uber announced a first half 2020 GAAP loss of $4.7 billion with a GAAP net margin of (-81%). Uber’s “official” full year 2019 result was a GAAP loss of $8.5 billion with a (-60%) margin, but these were based on problematic accounting that makes it impossible to evaluate Uber’s financial performance properly over time." "Uber has now lost $23.2 billion in the past four and a half years." "Nothing has happened to change the fact that after ten years, riders have always been fundamentally unwilling to pay prices that would cover Uber’s actual costs, that Uber was always less efficient than the traditional taxis it drove out of business, that its only “efficiency improvement” was to push driver compensation to minimum wage levels, and that its growth depended entirely on unsustainable predatory subsidies." Yep, that's not a good business alright. [1] https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html https://www.nakedcapitalism.com/2020/08/hubert-horan-can-ube...
- evgen 6y ago
  There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. The taxi companies also have better economics when it comes to their fleet (you can expect states to start mandating that gig drivers be paid some additional amount for vehicle depreciation any day now...) At the end of the day Uber/Lyft will be just another taxi company, albeit with a less professional set of drivers.
LarryDarrell 6y ago
Gig work and all that implies would be more tolerable in the US if we had a universal health care system and worked hard to craft policies to make housing affordable (not an investment). Until that world comes to pass, the slow but growing movement to treat gig workers as employees will only get bigger and bigger. I doubt even in 20 years we'll have fully autonomous driving cars in every jurisdiction. If I were Uber or another company who relies on gig work to exist, I would be pouring money into lobbying for universal health care. That would ease the pressure considerably.
- dominotw 6y ago
  > would be pouring money into lobbying for universal health care Dara already admitted to this in recode podcast.
  - LarryDarrell 6y ago
    Thanks, I'll give it a listen!
- rhino369 6y ago
  Why should we, as a country, want low paying jobs that only support people with subsidies from others? I support universal healthcare from a humanitarian perspective. But it doesn't make sense to tax everyone else so that Uber can cut labor costs.
  - malandrew 6y ago
    > Why should we, as a country, want low paying jobs that only support people with subsidies from others? Because the alternative for the people taking those jobs is often no paying jobs where you need to subsidize the entirety of the needs of such people instead of just subsidizing what wasn't covered by the low paying job. Making low paying jobs illegal doesn't magically result in the creation of well paying jobs.
dominotw 6y ago
> These companies are trying to survive legal challenges to their illegal hiring practices illegal?
Zenst 6y ago
When I see a "it's doomed" article about a company from any newspaper - I look at previous articles for contrast and found this better reading having just read: https://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london https://www.theguardian.com/technology/2016/apr/27/how-uber-... Allows me to give the credibility to the article it deserves. For me Uber already lost a customer for life due to horrendous customer service that showed a corporate culture of the worst once I picked thru it all. So for me they are already dead.
danimal88 6y ago
Raising prices != Doomed... Their business model: request a ride, pay for a ride, is not doomed. Their low prices might be. Yes, their economics pitched to investors relied on automation that's not here, but for medium density spaces, cabs have so much more overhead and will struggle to keep up unless they have a platform/brand that is competitive with lyft and uber.
- danimal88 6y ago
  Also adding that perhaps the biggest unnoticed feature with uber and lyft is the feedback loop. Good drivers and good riders stay on the platform, which is good for the users. The Cab experience on the other hand is some guy mumbling (best case) into an ear peice the whole ride while accelerating/braking like they are driving an indy car, all while getting into a sticky back seat and needing to settle up akwardly at the end of the ride. If cabs are going to take back some market share, they need to invest in their experience.
aphextron 6y ago
It's not even the underlying business model that's unsound. People will always need to get from point A to B, and the app based ride hailing model has completely revolutionized the fulfillment of this fundamental need. That's not going anywhere. Uber's problem is in their scale. You get essentially zero benefits and all of the drawbacks from massive scale in this industry, with the fact that your technology is trivially replicable by competitors, and brand loyalty is almost non existent. Uber is doomed in its' current incarnation. But my bet is that the future for ride hailing is one of hundreds of different competing local services around the world that focus on their locality, work directly with local officials and regulators, and provide good customer service while keeping overhead extremely low and operating profitably.
- bhupy 6y ago
  > But my bet is that the future for ride hailing is one of hundreds of different competing local services around the world that focus on their locality, work directly with local officials and regulators, and provide good customer service while keeping overhead extremely low and operating profitably. I would argue that this is Uber's bet also. I like to joke that Uber is sort of a ridesharing index fund, since they own large minority positions in nearly every competitor / market leader in localities in which they "lost" (Didi, Grab, Yandex).
- room271 6y ago
  The model is unsound. Private vehicles on roads in cities cause a ton of pollution (and I don't mean CO2) that is very undesirable. Public/mass transport with good mechanisms for short journeys to and from hubs is a better model. The rise of ebikes and scooters is an encouraging alternative here too. Yes of course there are times when people need a car, but they are not the majority of the time for the majority of people. And their severe externalities need to be priced in to discourage use.
  - aphextron 6y ago
    >Public/mass transport with good mechanisms for short journeys to and from hubs is a better model. Maybe in Europe or Asia. But in the US, private vehicles are the only viable option for a huge portion of the population. Our entire society is built around it. The density simply isn't there for public transit to make any sense, and distances are far too vast for scooters/e-bikes to work.
Animats 6y ago
Only in a world where more profitable opportunities for investment are sorely lacking can such wild bets on far-flung futuristic technologies become massive multinational companies. Corporations and wealthy individuals have accumulated huge sums of money and cannot figure out where to put it because returns on investments are extremely low. The flip side of falling rates of business investment is a slackening pace of economic growth, which economists have termed “secular stagnation.” It’s this decades-long slowdown that has generated the insecure labour force on which Uber and Lyft rely. Now that's a very important statement. It's correct. First, how US-specific is this? Is it true for the EU? Japan? China? India? Second, why are profitable opportunities for investment lacking? Why are people not building larger solar panels and wind farms in the US? Why is it taking so long to get electric cars going? Why are there no new home appliance companies in the US? Why isn't the return on investment there?
- pkaye 6y ago
  Maybe those other things needs much larger initial investments. Meanwhile investors see software startups that scale from two people up to thousands as the concept it proven.
- coliveira 6y ago
  The US has a tax system that discourages production and stimulates financial investments. That's why it is so easy to create bubbles on companies that have no solid business future. As long as the stock goes up, people think everything is ok, and many will make money. The losses will be left in the hands of later investors and the government (through bail outs).
  - Animats 6y ago
    What does Germany do differently? Germany has a strong manufacturing base.
    - the-dude 6y ago
      Family owned businesses? It is not rare to see a not too big factory outside a small village ( same for Switzerland ).
timwaagh 6y ago
he does not even bother to explain the premise: why uber drivers should be classified as employees. If that makes me really dumb, so be it. They're paid per job and have no exclusivity to work for one employer. How are they different from say, the plumber?
- tick_tock_tick 6y ago
  Plumbers aren't in the news and wouldn't add much to the state budget with their payroll and unemployment taxes.
skybrian 6y ago
It seems to me that a big problem with the discussions surrounding Uber and Lyft is that so many people claim they know what drivers want, but it's usually based on little or no evidence. Who should represent drivers' interests? Uber and Lyft? California lawmakers? California voters? Opinion writers? A union? Even someone who is a driver doesn't necessarily know what other drivers want, since they might not be typical. Different drivers may want different things. It gets even worse when we talk about potential drivers. Drivers aren't a fixed set of people. There are people who aren't driving now, but might, under the right conditions. All of these have flaws. I'm pretty sure I don't know what drivers want, and the average person talking confidently about the issue on the Internet probably doesn't know either. As a result, very little commentary has any credibility.
- panic 6y ago
  Newspapers could solicit writing from the drivers and let them speak for themselves.
  - deleted 6y ago
    [deleted]
  - iso1631 6y ago
    What's a newspaper?
- adamlett 6y ago
  Who should represent drivers' interests? […] A union? Yes.
- ramraj07 6y ago
  This gets brought up often, and the other comment said is that most drivers say they like their uber gig and the freedom it gives. I too have asked the question often and similarly gotten positive responses most of the time. But I have also learned that when you question a person's career choice they will almost never belittle it, presumably because that's an affront to their decision making abilities - it's a tacit acknowledgment that they have done goof'd with their lives. I've noticed it in other places too, where arguably similar bad permanent career decisions are made, viz academia. The only question is if the government needs to be involved here to protect the people from themselves or not; my gut says no. Arguably the porn industry is far more predatory towards women (if documentaries are to be believed) yet no one's vehemently protesting to ban that industry, so I see no reason the government should bother with excessive regulation here (though some basic rules might not hurt, even the porn industry has some rules).
Ansil849 6y ago
Pardon the very basic question, but as someone who just casually sees articles pop up about Uber, I genuinely don't understand how the company continues to exist. Is this very rudimentary attempt at understanding of what's happening correct: investors keep adding funding despite regular losses because they're hopeful for a sizable return in the (far?) future?
- tristanj 6y ago
  On Uber's platform, the marginal cost for one ride, i.e. the cost for Uber to coordinate a ride, is tiny. Uber's cost of a ride are its server and maintenance costs, its incremental rider/driver customer support costs, and credit card transaction costs. These add up to less than 5% of the rider's total fare cost. In developed markets, Uber takes a 25% cut of the total fare cost of every ride. The 25% cut far exceeds the 5% marginal cost of the ride. On each ride that occurs on their platform, Uber makes a 20% profit. The more rides Uber handles, the more money they make. Last year, Uber managed 3 million trips per day on its platform. If Uber did 2-3x the number of rides it did last year, it would be a very profitable company. It has not yet reached this point (investors are still waiting). However, Uber has very high fixed costs, mostly from its Silicon Valley salaries. Further, trips in developing markets are heavily subsidized and occur at a loss. Uber management has focused on cutting costs to extend runway & make profitability happen sooner.
  - Ansil849 6y ago
    Thank you, but so this doesn't answer my original question: how does Uber then continue to exist, given all the news I see seems to suggest that those fixed costs you're describing are leading to Uber not actually being profitable.
    - tristanj 6y ago
      The 'rides' division of Uber is profitable, or at least, was profitable before Covid. The rides division brought in a net positive of $742m in 2019. Uber as a whole is not profitable since they lose money on their Eats, Freight, and self driving divisions. The Rides division has only recently been profitable; it lost money for over a decade and started being profitable in 2019. Rides is profitable because Uber has significantly reduced subsidizing rides. They also have cut expansion in many developing markets. Finally they raised prices in developed markets. See their 2019 Q4 financials - they now claim to make, on average, a 24% margin on every Uber ride. https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-Results-for-Fourth-Quarter-and-Full-Year-2019/ https://investor.uber.com/news-events/news/press-release-det... Uber as a whole can become profitable at any time by cutting their money-losing divisions.
klmadfejno 6y ago
A lot of people are saying Uber can just raise prices. Sure, they can, but Uber's not like other businesses. If Uber raises prices, then fewer people take rides. If fewer people take rides, then its harder for riders to make money. Even if an equilibrium is reached with fewer drivers and fewer riders at the same cost of labor, it's harder for Uber meet flexible demand and manage driver retention, and what not. It could create a feedback loop where higher prices require higher driver wages resembling economies of scale.
Animats 6y ago
Uber is very clever. They've been able to automate the task of the slave overseer with the bullwhip. Dropping drivers who don't get enough stars keeps them in fear and working hard. Dropping drivers for refusing rides keeps them ready for work even while they're not being paid. "Machines should think. People should work" - no longer the future, it's the present.
deleted 6y ago
[deleted]
sassycassie 6y ago
interesting read.
jaybrendansmith 6y ago
What about a ride-sharing protocol, like IRC? Seems like this is what is needed. We don't need a company here to help us hail a ride, we just need a standard way to hail a ride. We would then need to use our judgment as always. Caveat Emptor. I know there's little money to be made in the creation of an RFC for ride sharing. So much of the current Internet could be standardized in this way.
ogurechny 6y ago
The hypothesis about self-driving cars doesn't hold water. Anyone doing practical assessment of the idea (as opposed to table talk) knows there won't be any, at least until all the infrastructure and human-driven cars are reorganized to inter-operate with automatic ones. “If the mountain won't come to Muhammad…” — unfortunately, it is possible that people will have to adapt to robots instead of the other way round if everyone decides that it really is the future. It might be that the author believes the general idea of “car sharing” to be correct, and struggles to find the reason why the company loses money. The problem is that the whole thing is a lie. Their business model is not self-driving taxis. As with other “platforms”, it's just blatant cutting down on “irrelevant” expenses wile keeping the good bits to themselves under the pretense that they are just “operating the computer” that allows someone else to do “everything”. Uber might have a lot of money to smokescreen it, and keep the image of a middle-class citizen “sharing” the car for a certain price, but in other places competition between taxi companies rapidly “optimizing” and “professionalizing” the market makes it clear that humanity has pompously reinvented the hackney coach. Even worse, the unregulated hackney coach, when poorest peasants ride their carriages to a big city and work endless shifts trying to catch some passenger first to be able to feed themselves for a day, or some rickshaws fight and badmouth each other only to get the tiniest number of coins. A typical driver for a “digital” taxicab is a sleep-deprived immigrant (private person or an employee of an official subcontractor, there's little difference) wielding a number of burner phones running client apps from different companies (BTW, location spoofing solutions market is booming) who is useless without a navigation (hooray for modern bio-robots), but jumps every red light to shave minutes off. The real sharing happens between drivers — they share shifts, devices, accounts, and cars. However, the only important thing is that the big company gets the commission from each and every ride, so it's all good. They seem to make enough money to spend some on remediation when accidents happen, all while keeping their stance on being just a system operator that gratuitously helps clients. None of this is specifically modern. Immigrants working as cab drivers predate computers, and tricks that allow stretching of taxi car shifts are just as old. Well, you can argue that there are ratings. (John Doe rated this driver 1/5: We both died in a car crash. Would not recommend.) Well, anyone in any kind of “digital marketplace” business can tell you that the whole point of stars, likes, and the like is to make users believe that there is a complex system that protects them in the background, and that their input matters. The fact is, the owner and only the owner of the system decides whether any of that is used, and to what extent. Say, how are upvotes and downvotes on Youtube videos used? They are just a game, something for users to fidget and feel satisfaction from.

73 points by donsupreme 6y ago

At least over the last 2 yrs I was saying that Uber and Lyft should get out of the self driving tech business. Its not who they are, and there is no reason to invest in it when they could easily consume the best tech out there when it becomes available. I now feel even more strongly so. In fact it feels like these companies might themselves be re-evaluating their priorities at this point. I see absolutely no reason to invest in FSD themselves other than to attract talent. They should instead accept that their value to the world is they unified the taxi system and turned it into a global service that drivers can use. They should focus on their core business and figure out their issues with drivers and employees. They could cut the FSD costs and instead partner with Google or some other company. Or they could wait and also partner with any other car manufacturer out there that gets to FSD market. These companies could be huge buyers of the tech when available and so auto manufacturers will fall over themselves to get their business. I wouldn't say its doomed though.

evgen 6y ago
If FSD had actually turned out to be as easy as some people were suggesting 5+ years ago then there is no way Uber or Lyft could avoid playing in that game; the first company who could mass-produce FSD vehicles would be able to replace Uber/Lyft with no difficulty at all. Once it became apparent that the 'any day now' BS from Musk et al was a lie then both companies should have dropped any efforts in this direction immediately.
- arcticbull 6y ago
  An MIT study indicated developing their own FSD technology would yield at most a small margin improvement because the technology wouldn't be exclusive for long, and shortly after it would be utterly commodity. [1] [1] https://www.businessinsider.com/uber-lyft-self-driving-taxis-may-not-help-profitability-mit-2019-5 https://www.businessinsider.com/uber-lyft-self-driving-taxis...
- oblib 6y ago
  I agree. FSD is far more complex than even Musk imagined (or at least has portrayed) and while I'm very impressed with what's been done in that field I'd never use it in the real world.

rrivers 6y ago

About a year ago I penned a short essay about this exact subject. Central argument is that Uber is the type of organization that should be open to public ownership given that there is no road to profitability for them. Since writing, states like CA have taken firmer stances on gig economy workers and employment status. The alternative is that Uber continues to try and find avenues of financialization instead of continuing to experiment and innovate with their core service model. Article Link: https://medium.com/swlh/socializing-uber-for-society-shareholders-5cc4a27d28d4?source=friends_link&sk=8a819492253bd3e990b845861f8f32fc https://medium.com/swlh/socializing-uber-for-society-shareho...

lacker 6y ago

It's too bad that this whole article never touches on the basics of Uber's business model, like how much money they lose on each ride, how much funding they have to ride out the current economic climate, the crazy fact that Uber Eats is now a larger part of Uber's American business than the drive-me-somewhere Uber business, and so on. I don't see how Uber's business model is doomed. If Uber and Lyft are forced to be less efficient, they will raise prices. Yes, their business would shrink. But how could they be forced out of business entirely - would people go back to using taxis?? At the very least, Uber could charge the same price as taxis and be superior to taxis because an Uber actually shows up when you want one.

arcticbull 6y ago
I recommend the Naked Capitalism series on Uber's economics. [1] It's a 23-part series that goes back years, but the most recent one I linked you from a few months ago should be a good starting point. "Uber announced a first half 2020 GAAP loss of $4.7 billion with a GAAP net margin of (-81%). Uber’s “official” full year 2019 result was a GAAP loss of $8.5 billion with a (-60%) margin, but these were based on problematic accounting that makes it impossible to evaluate Uber’s financial performance properly over time." "Uber has now lost $23.2 billion in the past four and a half years." "Nothing has happened to change the fact that after ten years, riders have always been fundamentally unwilling to pay prices that would cover Uber’s actual costs, that Uber was always less efficient than the traditional taxis it drove out of business, that its only “efficiency improvement” was to push driver compensation to minimum wage levels, and that its growth depended entirely on unsustainable predatory subsidies." Yep, that's not a good business alright. [1] https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html https://www.nakedcapitalism.com/2020/08/hubert-horan-can-ube...
evgen 6y ago
There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. The taxi companies also have better economics when it comes to their fleet (you can expect states to start mandating that gig drivers be paid some additional amount for vehicle depreciation any day now...) At the end of the day Uber/Lyft will be just another taxi company, albeit with a less professional set of drivers.

LarryDarrell 6y ago

Gig work and all that implies would be more tolerable in the US if we had a universal health care system and worked hard to craft policies to make housing affordable (not an investment). Until that world comes to pass, the slow but growing movement to treat gig workers as employees will only get bigger and bigger. I doubt even in 20 years we'll have fully autonomous driving cars in every jurisdiction. If I were Uber or another company who relies on gig work to exist, I would be pouring money into lobbying for universal health care. That would ease the pressure considerably.

dominotw 6y ago
> would be pouring money into lobbying for universal health care Dara already admitted to this in recode podcast.
- LarryDarrell 6y ago
  Thanks, I'll give it a listen!
rhino369 6y ago
Why should we, as a country, want low paying jobs that only support people with subsidies from others? I support universal healthcare from a humanitarian perspective. But it doesn't make sense to tax everyone else so that Uber can cut labor costs.
- malandrew 6y ago
  > Why should we, as a country, want low paying jobs that only support people with subsidies from others? Because the alternative for the people taking those jobs is often no paying jobs where you need to subsidize the entirety of the needs of such people instead of just subsidizing what wasn't covered by the low paying job. Making low paying jobs illegal doesn't magically result in the creation of well paying jobs.

dominotw 6y ago

> These companies are trying to survive legal challenges to their illegal hiring practices illegal?

Zenst 6y ago

When I see a "it's doomed" article about a company from any newspaper - I look at previous articles for contrast and found this better reading having just read: https://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london https://www.theguardian.com/technology/2016/apr/27/how-uber-... Allows me to give the credibility to the article it deserves. For me Uber already lost a customer for life due to horrendous customer service that showed a corporate culture of the worst once I picked thru it all. So for me they are already dead.

danimal88 6y ago

Raising prices != Doomed... Their business model: request a ride, pay for a ride, is not doomed. Their low prices might be. Yes, their economics pitched to investors relied on automation that's not here, but for medium density spaces, cabs have so much more overhead and will struggle to keep up unless they have a platform/brand that is competitive with lyft and uber.

danimal88 6y ago
Also adding that perhaps the biggest unnoticed feature with uber and lyft is the feedback loop. Good drivers and good riders stay on the platform, which is good for the users. The Cab experience on the other hand is some guy mumbling (best case) into an ear peice the whole ride while accelerating/braking like they are driving an indy car, all while getting into a sticky back seat and needing to settle up akwardly at the end of the ride. If cabs are going to take back some market share, they need to invest in their experience.

aphextron 6y ago

It's not even the underlying business model that's unsound. People will always need to get from point A to B, and the app based ride hailing model has completely revolutionized the fulfillment of this fundamental need. That's not going anywhere. Uber's problem is in their scale. You get essentially zero benefits and all of the drawbacks from massive scale in this industry, with the fact that your technology is trivially replicable by competitors, and brand loyalty is almost non existent. Uber is doomed in its' current incarnation. But my bet is that the future for ride hailing is one of hundreds of different competing local services around the world that focus on their locality, work directly with local officials and regulators, and provide good customer service while keeping overhead extremely low and operating profitably.

bhupy 6y ago
> But my bet is that the future for ride hailing is one of hundreds of different competing local services around the world that focus on their locality, work directly with local officials and regulators, and provide good customer service while keeping overhead extremely low and operating profitably. I would argue that this is Uber's bet also. I like to joke that Uber is sort of a ridesharing index fund, since they own large minority positions in nearly every competitor / market leader in localities in which they "lost" (Didi, Grab, Yandex).
room271 6y ago
The model is unsound. Private vehicles on roads in cities cause a ton of pollution (and I don't mean CO2) that is very undesirable. Public/mass transport with good mechanisms for short journeys to and from hubs is a better model. The rise of ebikes and scooters is an encouraging alternative here too. Yes of course there are times when people need a car, but they are not the majority of the time for the majority of people. And their severe externalities need to be priced in to discourage use.
- aphextron 6y ago
  >Public/mass transport with good mechanisms for short journeys to and from hubs is a better model. Maybe in Europe or Asia. But in the US, private vehicles are the only viable option for a huge portion of the population. Our entire society is built around it. The density simply isn't there for public transit to make any sense, and distances are far too vast for scooters/e-bikes to work.

Animats 6y ago

Only in a world where more profitable opportunities for investment are sorely lacking can such wild bets on far-flung futuristic technologies become massive multinational companies. Corporations and wealthy individuals have accumulated huge sums of money and cannot figure out where to put it because returns on investments are extremely low. The flip side of falling rates of business investment is a slackening pace of economic growth, which economists have termed “secular stagnation.” It’s this decades-long slowdown that has generated the insecure labour force on which Uber and Lyft rely. Now that's a very important statement. It's correct. First, how US-specific is this? Is it true for the EU? Japan? China? India? Second, why are profitable opportunities for investment lacking? Why are people not building larger solar panels and wind farms in the US? Why is it taking so long to get electric cars going? Why are there no new home appliance companies in the US? Why isn't the return on investment there?

pkaye 6y ago
Maybe those other things needs much larger initial investments. Meanwhile investors see software startups that scale from two people up to thousands as the concept it proven.
coliveira 6y ago
The US has a tax system that discourages production and stimulates financial investments. That's why it is so easy to create bubbles on companies that have no solid business future. As long as the stock goes up, people think everything is ok, and many will make money. The losses will be left in the hands of later investors and the government (through bail outs).
- Animats 6y ago
  What does Germany do differently? Germany has a strong manufacturing base.
  - the-dude 6y ago
    Family owned businesses? It is not rare to see a not too big factory outside a small village ( same for Switzerland ).

timwaagh 6y ago

he does not even bother to explain the premise: why uber drivers should be classified as employees. If that makes me really dumb, so be it. They're paid per job and have no exclusivity to work for one employer. How are they different from say, the plumber?

tick_tock_tick 6y ago
Plumbers aren't in the news and wouldn't add much to the state budget with their payroll and unemployment taxes.

skybrian 6y ago

It seems to me that a big problem with the discussions surrounding Uber and Lyft is that so many people claim they know what drivers want, but it's usually based on little or no evidence. Who should represent drivers' interests? Uber and Lyft? California lawmakers? California voters? Opinion writers? A union? Even someone who is a driver doesn't necessarily know what other drivers want, since they might not be typical. Different drivers may want different things. It gets even worse when we talk about potential drivers. Drivers aren't a fixed set of people. There are people who aren't driving now, but might, under the right conditions. All of these have flaws. I'm pretty sure I don't know what drivers want, and the average person talking confidently about the issue on the Internet probably doesn't know either. As a result, very little commentary has any credibility.

panic 6y ago
Newspapers could solicit writing from the drivers and let them speak for themselves.
- deleted 6y ago
  [deleted]
- iso1631 6y ago
  What's a newspaper?
adamlett 6y ago
Who should represent drivers' interests? […] A union? Yes.
ramraj07 6y ago
This gets brought up often, and the other comment said is that most drivers say they like their uber gig and the freedom it gives. I too have asked the question often and similarly gotten positive responses most of the time. But I have also learned that when you question a person's career choice they will almost never belittle it, presumably because that's an affront to their decision making abilities - it's a tacit acknowledgment that they have done goof'd with their lives. I've noticed it in other places too, where arguably similar bad permanent career decisions are made, viz academia. The only question is if the government needs to be involved here to protect the people from themselves or not; my gut says no. Arguably the porn industry is far more predatory towards women (if documentaries are to be believed) yet no one's vehemently protesting to ban that industry, so I see no reason the government should bother with excessive regulation here (though some basic rules might not hurt, even the porn industry has some rules).

Ansil849 6y ago

Pardon the very basic question, but as someone who just casually sees articles pop up about Uber, I genuinely don't understand how the company continues to exist. Is this very rudimentary attempt at understanding of what's happening correct: investors keep adding funding despite regular losses because they're hopeful for a sizable return in the (far?) future?

tristanj 6y ago
On Uber's platform, the marginal cost for one ride, i.e. the cost for Uber to coordinate a ride, is tiny. Uber's cost of a ride are its server and maintenance costs, its incremental rider/driver customer support costs, and credit card transaction costs. These add up to less than 5% of the rider's total fare cost. In developed markets, Uber takes a 25% cut of the total fare cost of every ride. The 25% cut far exceeds the 5% marginal cost of the ride. On each ride that occurs on their platform, Uber makes a 20% profit. The more rides Uber handles, the more money they make. Last year, Uber managed 3 million trips per day on its platform. If Uber did 2-3x the number of rides it did last year, it would be a very profitable company. It has not yet reached this point (investors are still waiting). However, Uber has very high fixed costs, mostly from its Silicon Valley salaries. Further, trips in developing markets are heavily subsidized and occur at a loss. Uber management has focused on cutting costs to extend runway & make profitability happen sooner.
- Ansil849 6y ago
  Thank you, but so this doesn't answer my original question: how does Uber then continue to exist, given all the news I see seems to suggest that those fixed costs you're describing are leading to Uber not actually being profitable.
  - tristanj 6y ago
    The 'rides' division of Uber is profitable, or at least, was profitable before Covid. The rides division brought in a net positive of $742m in 2019. Uber as a whole is not profitable since they lose money on their Eats, Freight, and self driving divisions. The Rides division has only recently been profitable; it lost money for over a decade and started being profitable in 2019. Rides is profitable because Uber has significantly reduced subsidizing rides. They also have cut expansion in many developing markets. Finally they raised prices in developed markets. See their 2019 Q4 financials - they now claim to make, on average, a 24% margin on every Uber ride. https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-Results-for-Fourth-Quarter-and-Full-Year-2019/ https://investor.uber.com/news-events/news/press-release-det... Uber as a whole can become profitable at any time by cutting their money-losing divisions.

klmadfejno 6y ago

A lot of people are saying Uber can just raise prices. Sure, they can, but Uber's not like other businesses. If Uber raises prices, then fewer people take rides. If fewer people take rides, then its harder for riders to make money. Even if an equilibrium is reached with fewer drivers and fewer riders at the same cost of labor, it's harder for Uber meet flexible demand and manage driver retention, and what not. It could create a feedback loop where higher prices require higher driver wages resembling economies of scale.

Animats 6y ago

Uber is very clever. They've been able to automate the task of the slave overseer with the bullwhip. Dropping drivers who don't get enough stars keeps them in fear and working hard. Dropping drivers for refusing rides keeps them ready for work even while they're not being paid. "Machines should think. People should work" - no longer the future, it's the present.

deleted 6y ago

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sassycassie 6y ago

interesting read.

jaybrendansmith 6y ago

What about a ride-sharing protocol, like IRC? Seems like this is what is needed. We don't need a company here to help us hail a ride, we just need a standard way to hail a ride. We would then need to use our judgment as always. Caveat Emptor. I know there's little money to be made in the creation of an RFC for ride sharing. So much of the current Internet could be standardized in this way.

ogurechny 6y ago

The hypothesis about self-driving cars doesn't hold water. Anyone doing practical assessment of the idea (as opposed to table talk) knows there won't be any, at least until all the infrastructure and human-driven cars are reorganized to inter-operate with automatic ones. “If the mountain won't come to Muhammad…” — unfortunately, it is possible that people will have to adapt to robots instead of the other way round if everyone decides that it really is the future. It might be that the author believes the general idea of “car sharing” to be correct, and struggles to find the reason why the company loses money. The problem is that the whole thing is a lie. Their business model is not self-driving taxis. As with other “platforms”, it's just blatant cutting down on “irrelevant” expenses wile keeping the good bits to themselves under the pretense that they are just “operating the computer” that allows someone else to do “everything”. Uber might have a lot of money to smokescreen it, and keep the image of a middle-class citizen “sharing” the car for a certain price, but in other places competition between taxi companies rapidly “optimizing” and “professionalizing” the market makes it clear that humanity has pompously reinvented the hackney coach. Even worse, the unregulated hackney coach, when poorest peasants ride their carriages to a big city and work endless shifts trying to catch some passenger first to be able to feed themselves for a day, or some rickshaws fight and badmouth each other only to get the tiniest number of coins. A typical driver for a “digital” taxicab is a sleep-deprived immigrant (private person or an employee of an official subcontractor, there's little difference) wielding a number of burner phones running client apps from different companies (BTW, location spoofing solutions market is booming) who is useless without a navigation (hooray for modern bio-robots), but jumps every red light to shave minutes off. The real sharing happens between drivers — they share shifts, devices, accounts, and cars. However, the only important thing is that the big company gets the commission from each and every ride, so it's all good. They seem to make enough money to spend some on remediation when accidents happen, all while keeping their stance on being just a system operator that gratuitously helps clients. None of this is specifically modern. Immigrants working as cab drivers predate computers, and tricks that allow stretching of taxi car shifts are just as old. Well, you can argue that there are ratings. (John Doe rated this driver 1/5: We both died in a car crash. Would not recommend.) Well, anyone in any kind of “digital marketplace” business can tell you that the whole point of stars, likes, and the like is to make users believe that there is a complex system that protects them in the background, and that their input matters. The fact is, the owner and only the owner of the system decides whether any of that is used, and to what extent. Say, how are upvotes and downvotes on Youtube videos used? They are just a game, something for users to fidget and feel satisfaction from.