12 ms·

Uber, DoorDash and similar firms can’t defy the laws of capitalism after all

108 points by nabla9 5y ago

dustinmoris 5y ago
From a customer's perspective Uber was always a scheme to me which was great at extracting money from rich and utterly dumb Saudis to compensate our taxi fares in the West. Thanks I guess lol
- sva_ 5y ago
  It was my impression that those "utterly dumb Saudis", as you call them, only invested in the very beginning and took out their profits long ago. I might be wrong though.
mitchbob 5y ago
Archived: https://archive.ph/kCkXz https://archive.ph/kCkXz
mitchbob 5y ago
https://archive.ph/kCkXz https://archive.ph/kCkXz
paulpauper 5y ago
>The payout on one of the most richly-funded bets of the past decade or so revolves around whether ride-sharing and delivery firms—which once were part of something known as the “sharing economy” but are better described as the “flywheel economy”—can actually ever live up to their heady promise. The outcome will matter to more than just venture capitalists who backed their growth. Whether these flywheels do gather unstoppable momentum is also of interest to regulators worried about technology’s propensity for winner-takes-all business models, not to mention paid-by-the-gig workers caught in its cogs. Yaawn another one of these "{insert successful company name here} is not unsustainable because of blahv blahh blah" articles. In spite of endless negative media coverage, Uber is still valued at over $50 billion. I remember all the endless articles from 2012-2018 about all the debt Uber had and how it was not sustinable. If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Almost anyone, individual or hedge fund, can stand to profit from the inability of Uber and Doordash to keep defying 'the laws of capitalism'.
- krageon 5y ago
  > If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Stocks can remain irrational for a long time. This advice is bad for precisely that reason.
- jjulius 5y ago
  Care to elaborate as to why you think Uber is still sustainable, beyond simply telling others to put their money where their mouths are?
- metalliqaz 5y ago
  "the market can remain irrational longer than... " you know the rest. A high market cap does not invalidate any argument. Enron was highly valued, real estate funds were highly valued, Theranos was highly valued, etc... until they weren't.
metalliqaz 5y ago
Massive wealth consolidation leads to huge piles of capital that are itching to invest in ventures, which leads to entrepreneurs sprouting up to pitch ideas for a piece of the pie. To get the most enthusiastic investments, they don't bother building a productive company but instead pitch dazzling tech startups that operate at a massive loss in order to disrupt and grow to critical user mass, in order to replace a legacy market with a proprietary platform and thus enable indefinite rent-seeking for growth-obsessed investors. The "flywheel" tech companies aren't the point, getting hands on venture capital is the point. That sounds like good old normal capitalism as I understand it. Edit: fixed run-on sentence
- goodpoint 5y ago
  Capitalism should be defined by free markets, among other things. What we are seeing is an unprecedented combination of quasi-monopolies, rent-seeking, and an economy disconnected from real production of goods and services. It has been called neofeudalism.
  - WitCanStain 5y ago
    But all that is the natural and inevitable consequence of capitalism. It's baked into the structure of the system.
    - maedla 5y ago
      Exactly. People want to go back to the thing that got us here
      - deleted 5y ago
        [deleted]
    - goodpoint 5y ago
      Indeed.
    - gwright 5y ago
      >rent-seeking, Unfortunately "capitalism" is a pretty ill-defined term. I wouldn't include "rent-seeking" as a characteristic of "capitalism" but apparently you do. This makes it very difficult to have coherent discussions. For what it is worth, I think "rent-seeking" is probably a characteristic of all economic systems and therefore isn't something peculiar to "capitalism" and so shouldn't be used as a criticism of "capitalism".
nathanganser 5y ago
Bypass the paywall -> https://outline.com/TMHXeX https://outline.com/TMHXeX
moolcool 5y ago
This may be a hot take, but I think the gig economy is one thing which could be a pretty solid use of the blockchain. Uber/DoorDash/Lyft are all pretty simple CRUD apps at their core, and the companies themselves do very little actual work. Unfortunately, due to the Silicon Valley cult of growth, they are still either unprofitable or barely profitable while also taking a pretty massive cut away from actual workers on the ground. Restaurants are stuck with them due to vendor lock-in, and they have to cut their margins or raise prices as a result. The consumer loses, the drivers lose, and the restaurants lose. Most of the functions of the main delivery platforms could easily be achieved through smart contracts, and then drivers would act as owner-operators instead of "independent contractors". They would also be able to get 100% of the fees associated with the delivery.
- alphabettsy 5y ago
  The companies exist because there’s a value in a middle-man handling things like vetting drivers, tax and regulatory compliance, and handling disputes like “my food is partially eaten”. You could use the blockchain in some ways, but I don’t see how the companies themselves could be easily replaced.
  - moolcool 5y ago
    It would serve as a neutral platform on which clients could be built though. Like instead of a restaurant listing on the existing apps, they'd list their menus on the blockchain and third party clients could exist and race-for-the-bottom in terms of fees. It's like the difference between Twitter and Email
    - jjulius 5y ago
      > Like instead of a restaurant listing on the existing apps, they'd list their menus on the blockchain... ... or just a database?
      - cmckn 5y ago
        Well you wouldn’t want any ~~~centralized~~~ entity having control of the appetizers, would you??? Much better to store every menu of every restaurant on thousands of computers and use menu updates to decimate coral reefs.
paxys 5y ago
I was expecting a data driven argument but the bits of data shared actually contradict the author. These companies mentioned are collectively worth $500B, after taking $100B in venture capital. They are starting to get profitable. Demand for their services is increasing. This article is thousands of words of the exact same talking points we have been hearing for a decade. What's the "after all" part?
- jjulius 5y ago
  >They are starting to get profitable. No. They posted an adjusted Q3 profit of $8M, with an actual Q3 loss of $2.4B.
  - cactus2093 5y ago
    The $2.4B loss is a write-down of their ownership in Didi which has nothing to do with the basic economics of Uber's operations.
    - X6S1x6Okd1st 5y ago
      Wasn't part of the basic operations to pay for capturing all the markets?
      - edanm 5y ago
        Presumably no, because that was a one-off fee.
- ashtonkem 5y ago
  "We're worth 5X what the investors put in despite losing all that money so far" strikes me as an argument for it being a bubble, not against.
- newfonewhodis 5y ago
  > They are starting to get profitable I don't know what you are basing this on but it's definitely not based on data. $UBER EPS over the last few quarters: -1.28 0.61 -0.06 -0.54 -0.62 $DASH EPS -0.30 -0.34 -2.67 The only way they are getting profitable is on an "adjusted basis", in other words when they exclude most of their expenses. That's not a business, that's a game.
JulianMorrison 5y ago
If you are dumping to own the market as a monopoly, and so is your competitor, and both of you are buoyed up by seemingly limitless investor finance, then all that happens is that investors' money moves into the customers' pockets.
- sva_ 5y ago
  I know a few people who've mostly survived on Uber Eats' welcome coupons for weeks now.
- mstipetic 5y ago
  And previous well functioning economies get destroyed in the process
  - batshit_beaver 5y ago
    If pervious economies were so well functioning, why couldn't I easily order pretty much any food from any restaurant within a 50 mile radius with a click of a button before Uber and DoorDash came along?
    - maedla 5y ago
      One could always just call
    - tempest_ 5y ago
      There existed many companies/people who would collect whatever you wanted and bring it where ever for a fee with a phone call. People would not be willing to pay the price however.
    - ska 5y ago
      > If pervious economies were so well functioning An efficient economy doesn't mean you can do anything you can imagine is technically possible; it means that market rates with everything priced in properly will discover whether or not enough people value it enough to pay for it.
    - 5y ago
xoa 5y ago
A core aspect seems to come at the end as a tossed in aside but gets disappointingly little consideration: >Real business flywheels do exist. Software makers have managed to lock users in and thus generate gross margins typically above 70%. No, it's not just "lock in" it's the magic of minimal to zero marginal cost, near zero "stocking" cost, instantaneous reaction to demand, etc. Software and digital services firms face dramatically different scaling curves than traditional physical products/services. That they also in turn have been able to continuously add in ways not limited by IRL physical constraints and experience real network effects certainly helps, but I suspect one of the big foundational issues for a lot of these valuations is people naively applying software business lessons to businesses based around hardware and real world physical human interactions. It doesn't cleanly translate though, they aren't the same thing.
- colinmhayes 5y ago
  The only way to consistently have margins above 70% is a strong lock in effect. All the other reasons who listed don't matter when a venture capitalist with a couple billion dollars can come in and rebuild the software. At 70% margins they absolutely would do that. The reason they don't is because consumers wouldn't actually switch to their product, even if it is cheaper, because they're already locked in.
- Ekaros 5y ago
  Real software or even content have minimal marginal costs... But these gig-economies clearly aren't software or content. And they have very real minimum price. And not even robotaxis will fix that. Just because you make software doesn't mean you are such tech company, see WeWork...
  - letmeinhere 5y ago
    I think that was their point
- deleted 5y ago
  [deleted]
- kmeisthax 5y ago
coldcode 5y ago
All of these companies may have a functional business and can stick around, but they are not worth the valuation present in their stock. Even Tesla is not worth anywhere near $1T. In the end you have to eventually earn enough to support the price (once all the Fed support goes away from the market) but none of these companies will ever make enough revenue or profit. For now unreality keeps the market high.
- batshit_beaver 5y ago
  Tesla is totally worth 1 trillion if the dollar is worth nothing.
- bdcravens 5y ago
  Tesla is profitable. The profit is propped up a bit by subsidies, but it seems strange to include the company in a discussion about service providers that are battling in a war of attrition.
  - mdoms 5y ago
    You can be profitable and also wildly overvalued. If I invest $50 million for a 50% stake in my neighbour's kids' lemonade stand it's very unlikely to be a reasonable valuation regardless of their gross margin.
  - ska 5y ago
    > The profit is propped up a bit by subsidies, b Does this mean that Tesla would have a smaller profit margin without subsidies, or that Tesla would not be profitable in real terms without the subsidies?
    - selectodude 5y ago
      Both. People would purchase fewer teslas without the tax credit and Tesla would have less income without the ability to trade their tax credits to “dirtier” manufacturers.
      - 5y ago
nabla9 5y ago
summary: Platform economy can create huge profits if you can lock in the markets. Create moat that keeps competition away. Uber, DoorDash have none of that. Uber's global brand recognition can help with tourists and business travelers who just want familiar, but they are small fraction of the market Uber needs to lock in to justify their market cap. Uber is not like Amazon with returns to scale.
- amelius 5y ago
  Uber built their castle in Apple's and Google's kingdom. E.g. nothing is stopping Google from offering a competing service, right from within Google Maps, or Android.
  - froidpink 5y ago
    Nothing except years of learning of how to launch and operate a non-software service like this properly
kyleblarson 5y ago
Looking at the insider transactions listings for either company I'd say capitalism is treating them quite well: https://finance.yahoo.com/quote/DASH/insider-transactions?p=DASH https://finance.yahoo.com/quote/DASH/insider-transactions?p=... https://finance.yahoo.com/quote/UBER/insider-transactions?p=UBER https://finance.yahoo.com/quote/UBER/insider-transactions?p=...
xyzzy21 5y ago
Ultimately you can NOT "magically" negate "Last Mile Costs" in cities and towns where the Last Mile path distance is enormous. Did my MBA thesis on this subject with the benefit of 20 years of engineering experience. The numbers simply do not work unless you change how cities and residences are built, which would cost far more than you'd ever gain from solving Last Mile costs - the breakeven time is of the order of 100-200 years! The VERY WORST are US-style suburbs. The best would be Asian-style urban - which NO US CITY is other than some parts of Manhattan.
- maccolgan 5y ago
  >Asian-style urban Do you include India in Asia?
- toomuchtodo 5y ago
  Would love to read your thesis if you’re willing to share.
  - crocodiletears 5y ago
    Seconded
- fumar 5y ago
  What do you think about last mile delivery robots? https://www.kiwibot.com https://www.kiwibot.com These little bots don't require the same level of human physical presence as Uber or DoorDash.
  - ska 5y ago
    > What do you think about last mile delivery robots? I suspect these will need truly significant infrastructure changes to actually function as last mile.
    - randycupertino 5y ago
      Agree! If actual human doordash and instacart delivery people can't read the sign or follow instructions to determine our house from the inlaw apartment, I doubt any robot is going to be able to get it done.
trentnix 5y ago
Steins Law strikes again… “If something can’t go on forever, it won’t.”
roystonvassey 5y ago
If there was any time to be skeptical of Uber's longevity, it is now (at least for me). My experience is anecdotal but I visit my home country every year for a few months and I can clearly notice the declining quality of Uber's services: 1. Vehicles, on average, take at least 10-15 mins longer to get 2. Even if you find a vehicle, 60% of these rides are canceled (either by the driver because they call me and find out they don't want to go that way or they just don't move at all and I'm forced to cancel) 3. After all this, if I am lucky to get into a commute, every driver has complaints about Uber (complaints include intransparent pricing, delays in payments). Most of these drivers are completely dependent on Uber or similar services and have heavy debts that they are now unable to service. 4. Uber's app itself appears to get bloated by the day and while they do appear to make an effort collect my feedback when rides get canceled, not once have I got an impression that the feedback matters at all. Additionally, payment options are numerous but they require me to complete multiple steps to finish which puts me off using it (not Uber's fault I suppose but is part of the riding experience). Given that they are competing against flag-down autos and rides, not to mention public transport and private vehicles (as electric bikes and cars get more popular), I think their model is not sustainable anymore and I expect them to struggle further as riders withdraw and once the demand-supply gap grows further, it's a downward spiral.
- sofixa 5y ago
  I've been seeing the same thing in Paris. It's gotten very unreliable, often requiring 15+ minutes to get a driver at the very least, and pricing is worse and worse.
- bennysomething 5y ago
  There's a shortage of drivers (in the UK at least) https://www.bbc.com/news/business-59158230 https://www.bbc.com/news/business-59158230 It's actually getting really noticeable. It used to be easy for me to hail a taxi or get an Uber from a pub, it's next to impossible now
  - arcturus17 5y ago
    I haven't read anything like that in Madrid, but I've been noticing it for a couple months now. Rides in central neighborhoods such as Chamberí used to take 2-3min at most, now it's very common to see waits of 7-8min.
LocalH 5y ago
"laws of capitalism" Is that like how in theory, theory is always right over practice, but in practice, practice is always right over theory?
carabiner 5y ago
I just know that when Uber was charging $60 for a ride to the airport (a couple years ago it was half that), my sister found a way to take transit for $3. This was in Seattle.
- klaaz0r 5y ago
  Exactly same here, I just started using taxi's for longer trips they don't cost more and I have a price upfront. Most people I know use uber in the city for short trips (but I am from Europe)
- vkou 5y ago
  There are a number of disadvantages to getting to the airport by LINK, especially if you have heavy bags. The more apt comparison is calling a cab to take you to the airport. I've never had to wait more than a few minutes at any hour of day or night, and the pricing is equivalent to Uber.
- bradlys 5y ago
  Works great if you’re very near transit or can have someone figure out that last mile for you. Works poorly if you’re not. I would take public transit where I live but I’m about 1-2 miles from the nearest bus stop that could get me to the airport (too far to walk with checked luggage). No big lots or houses where I live - people crammed in. The bus is unpredictable and runs infrequently and takes a very long route to get to the airport. (1+hr) If I take the train, I have to go even further walking and then I have to pay something like $9 then make a transfer (more time spent) and pay another $6. The time spent is maybe less than the bus but because of transfer - it can be quite slow. Add in that I’m usually traveling with a partner and I love to get to the airport just as boarding starts and this is a colossal waste of time + money. I pay the $30-35 for a Lyft/Uber and it’s way faster and more reliable. Sometimes cheaper too. It’s like 1/3rd the time spent (20-25min) vs 1.5hr+. Oh and I’m not adding in the unpleasantness of either transit option - just cost and time… I live in the peninsula of SFBA and go to SFO at least twice a year. Seattle has much better options for SeaTac if you’re in the actual city.
  - smilekzs 5y ago
yawaworht1978 5y ago
Yeah can't defy nothing with this model. A handful of parasitic wannabe visionaries grabbing as much investor money as fast they can so long the sales pitch sounds ok, meanwhile "disrupting" all laws they can and paying workers less than minimum wage. Seems like the drivers have wisened up in some places.
HockeyPlayer 5y ago
In Mexico last week an Uber was twice the cost of using inDriver. Our driver reported Uber taking 50% of the fare which is why so many users and drivers had switched to inDriver.
aaggarwal 5y ago
I see these articles every now and then over last 5-10 years, but as someone who has followed/worked around this industry in the past, I can tell you that there is enough demand, supply and capital for this industry and it is not going anywhere. All of these companies are EBDITA profitable with decent margins and the net loss is them reinvesting in marketing, product and M&A (from their earnings reports). As the effects of covid wanes, their profits are going to go up very quickly which will be seen over the next year.
gethoht 5y ago
I live in the Denver metro area and have recently travelled several places. Here in Denver rides are 20-50% more expensive than they were pre-pandemic and it takes noticeably longer to get a ride.
shikharraje 5y ago
I don't even mind that there are morons out there who think this kind of business model works. Hell, if you're dumb enough to realize that even hyper-competitive companies like Amazon can't make restaurant delivery work, but still want to invest in Doordash, go ahead. What REALLY gets my goat is how much mental real estate these wannabe entrepreneurs get. Personally, I joined the tech industry because I was more inspired by the smaller, incremental innovations that generated value. Something like CRT TVs becoming razor thin, or mobile phone cameras overtaking traditional cameras in resolution, or the Apple M1 chip/ARM, THAT was what I used to think of when I thought "Innovation". However, smart people around me these days, they have no interest in actually doing hard, innovative things. The definition of "smart" today, is actually to raise a bunch of VC money and get a "net worth". And that makes sense, doesn't it? Why work hard, when you can "generate" "billions" of value with just a Powerpoint slide deck? The end result of all this is that people actually get discouraged from doing the hard work and actually generating real value! Yeah, why should I spend time understanding Supply Chain basics, or studying Operations Research theory? Why should I actually come up with an improved heuristic for Travelling Salesman? Let me just make a shiny Powerpoint, and head on into my first VC meeting.

108 points by nabla9 5y ago

From a customer's perspective Uber was always a scheme to me which was great at extracting money from rich and utterly dumb Saudis to compensate our taxi fares in the West. Thanks I guess lol

sva_ 5y ago
It was my impression that those "utterly dumb Saudis", as you call them, only invested in the very beginning and took out their profits long ago. I might be wrong though.

mitchbob 5y ago

Archived: https://archive.ph/kCkXz https://archive.ph/kCkXz

mitchbob 5y ago

https://archive.ph/kCkXz https://archive.ph/kCkXz

paulpauper 5y ago

>The payout on one of the most richly-funded bets of the past decade or so revolves around whether ride-sharing and delivery firms—which once were part of something known as the “sharing economy” but are better described as the “flywheel economy”—can actually ever live up to their heady promise. The outcome will matter to more than just venture capitalists who backed their growth. Whether these flywheels do gather unstoppable momentum is also of interest to regulators worried about technology’s propensity for winner-takes-all business models, not to mention paid-by-the-gig workers caught in its cogs. Yaawn another one of these "{insert successful company name here} is not unsustainable because of blahv blahh blah" articles. In spite of endless negative media coverage, Uber is still valued at over $50 billion. I remember all the endless articles from 2012-2018 about all the debt Uber had and how it was not sustinable. If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Almost anyone, individual or hedge fund, can stand to profit from the inability of Uber and Doordash to keep defying 'the laws of capitalism'.

krageon 5y ago
> If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Stocks can remain irrational for a long time. This advice is bad for precisely that reason.
jjulius 5y ago
Care to elaborate as to why you think Uber is still sustainable, beyond simply telling others to put their money where their mouths are?
metalliqaz 5y ago
"the market can remain irrational longer than... " you know the rest. A high market cap does not invalidate any argument. Enron was highly valued, real estate funds were highly valued, Theranos was highly valued, etc... until they weren't.

metalliqaz 5y ago

Massive wealth consolidation leads to huge piles of capital that are itching to invest in ventures, which leads to entrepreneurs sprouting up to pitch ideas for a piece of the pie. To get the most enthusiastic investments, they don't bother building a productive company but instead pitch dazzling tech startups that operate at a massive loss in order to disrupt and grow to critical user mass, in order to replace a legacy market with a proprietary platform and thus enable indefinite rent-seeking for growth-obsessed investors. The "flywheel" tech companies aren't the point, getting hands on venture capital is the point. That sounds like good old normal capitalism as I understand it. Edit: fixed run-on sentence

goodpoint 5y ago
Capitalism should be defined by free markets, among other things. What we are seeing is an unprecedented combination of quasi-monopolies, rent-seeking, and an economy disconnected from real production of goods and services. It has been called neofeudalism.
- WitCanStain 5y ago
  But all that is the natural and inevitable consequence of capitalism. It's baked into the structure of the system.
  - maedla 5y ago
    Exactly. People want to go back to the thing that got us here
    - deleted 5y ago
      [deleted]
  - goodpoint 5y ago
    Indeed.
  - gwright 5y ago
    >rent-seeking, Unfortunately "capitalism" is a pretty ill-defined term. I wouldn't include "rent-seeking" as a characteristic of "capitalism" but apparently you do. This makes it very difficult to have coherent discussions. For what it is worth, I think "rent-seeking" is probably a characteristic of all economic systems and therefore isn't something peculiar to "capitalism" and so shouldn't be used as a criticism of "capitalism".

nathanganser 5y ago

Bypass the paywall -> https://outline.com/TMHXeX https://outline.com/TMHXeX

moolcool 5y ago

This may be a hot take, but I think the gig economy is one thing which could be a pretty solid use of the blockchain. Uber/DoorDash/Lyft are all pretty simple CRUD apps at their core, and the companies themselves do very little actual work. Unfortunately, due to the Silicon Valley cult of growth, they are still either unprofitable or barely profitable while also taking a pretty massive cut away from actual workers on the ground. Restaurants are stuck with them due to vendor lock-in, and they have to cut their margins or raise prices as a result. The consumer loses, the drivers lose, and the restaurants lose. Most of the functions of the main delivery platforms could easily be achieved through smart contracts, and then drivers would act as owner-operators instead of "independent contractors". They would also be able to get 100% of the fees associated with the delivery.

alphabettsy 5y ago
The companies exist because there’s a value in a middle-man handling things like vetting drivers, tax and regulatory compliance, and handling disputes like “my food is partially eaten”. You could use the blockchain in some ways, but I don’t see how the companies themselves could be easily replaced.
- moolcool 5y ago
  It would serve as a neutral platform on which clients could be built though. Like instead of a restaurant listing on the existing apps, they'd list their menus on the blockchain and third party clients could exist and race-for-the-bottom in terms of fees. It's like the difference between Twitter and Email
  - jjulius 5y ago
    > Like instead of a restaurant listing on the existing apps, they'd list their menus on the blockchain... ... or just a database?
    - cmckn 5y ago
      Well you wouldn’t want any ~~~centralized~~~ entity having control of the appetizers, would you??? Much better to store every menu of every restaurant on thousands of computers and use menu updates to decimate coral reefs.

paxys 5y ago

I was expecting a data driven argument but the bits of data shared actually contradict the author. These companies mentioned are collectively worth $500B, after taking $100B in venture capital. They are starting to get profitable. Demand for their services is increasing. This article is thousands of words of the exact same talking points we have been hearing for a decade. What's the "after all" part?

jjulius 5y ago
>They are starting to get profitable. No. They posted an adjusted Q3 profit of $8M, with an actual Q3 loss of $2.4B.
- cactus2093 5y ago
  The $2.4B loss is a write-down of their ownership in Didi which has nothing to do with the basic economics of Uber's operations.
  - X6S1x6Okd1st 5y ago
    Wasn't part of the basic operations to pay for capturing all the markets?
    - edanm 5y ago
      Presumably no, because that was a one-off fee.
ashtonkem 5y ago
"We're worth 5X what the investors put in despite losing all that money so far" strikes me as an argument for it being a bubble, not against.
newfonewhodis 5y ago
> They are starting to get profitable I don't know what you are basing this on but it's definitely not based on data. $UBER EPS over the last few quarters: -1.28 0.61 -0.06 -0.54 -0.62 $DASH EPS -0.30 -0.34 -2.67 The only way they are getting profitable is on an "adjusted basis", in other words when they exclude most of their expenses. That's not a business, that's a game.

JulianMorrison 5y ago

If you are dumping to own the market as a monopoly, and so is your competitor, and both of you are buoyed up by seemingly limitless investor finance, then all that happens is that investors' money moves into the customers' pockets.

sva_ 5y ago
I know a few people who've mostly survived on Uber Eats' welcome coupons for weeks now.
mstipetic 5y ago
And previous well functioning economies get destroyed in the process
- batshit_beaver 5y ago
  If pervious economies were so well functioning, why couldn't I easily order pretty much any food from any restaurant within a 50 mile radius with a click of a button before Uber and DoorDash came along?
  - maedla 5y ago
    One could always just call
  - tempest_ 5y ago
    There existed many companies/people who would collect whatever you wanted and bring it where ever for a fee with a phone call. People would not be willing to pay the price however.
  - ska 5y ago
    > If pervious economies were so well functioning An efficient economy doesn't mean you can do anything you can imagine is technically possible; it means that market rates with everything priced in properly will discover whether or not enough people value it enough to pay for it.
  - 5y ago

xoa 5y ago

A core aspect seems to come at the end as a tossed in aside but gets disappointingly little consideration: >Real business flywheels do exist. Software makers have managed to lock users in and thus generate gross margins typically above 70%. No, it's not just "lock in" it's the magic of minimal to zero marginal cost, near zero "stocking" cost, instantaneous reaction to demand, etc. Software and digital services firms face dramatically different scaling curves than traditional physical products/services. That they also in turn have been able to continuously add in ways not limited by IRL physical constraints and experience real network effects certainly helps, but I suspect one of the big foundational issues for a lot of these valuations is people naively applying software business lessons to businesses based around hardware and real world physical human interactions. It doesn't cleanly translate though, they aren't the same thing.

colinmhayes 5y ago
The only way to consistently have margins above 70% is a strong lock in effect. All the other reasons who listed don't matter when a venture capitalist with a couple billion dollars can come in and rebuild the software. At 70% margins they absolutely would do that. The reason they don't is because consumers wouldn't actually switch to their product, even if it is cheaper, because they're already locked in.
Ekaros 5y ago
Real software or even content have minimal marginal costs... But these gig-economies clearly aren't software or content. And they have very real minimum price. And not even robotaxis will fix that. Just because you make software doesn't mean you are such tech company, see WeWork...
- letmeinhere 5y ago
  I think that was their point
deleted 5y ago
[deleted]
kmeisthax 5y ago

coldcode 5y ago

All of these companies may have a functional business and can stick around, but they are not worth the valuation present in their stock. Even Tesla is not worth anywhere near $1T. In the end you have to eventually earn enough to support the price (once all the Fed support goes away from the market) but none of these companies will ever make enough revenue or profit. For now unreality keeps the market high.

batshit_beaver 5y ago
Tesla is totally worth 1 trillion if the dollar is worth nothing.
bdcravens 5y ago
Tesla is profitable. The profit is propped up a bit by subsidies, but it seems strange to include the company in a discussion about service providers that are battling in a war of attrition.
- mdoms 5y ago
  You can be profitable and also wildly overvalued. If I invest $50 million for a 50% stake in my neighbour's kids' lemonade stand it's very unlikely to be a reasonable valuation regardless of their gross margin.
- ska 5y ago
  > The profit is propped up a bit by subsidies, b Does this mean that Tesla would have a smaller profit margin without subsidies, or that Tesla would not be profitable in real terms without the subsidies?
  - selectodude 5y ago
    Both. People would purchase fewer teslas without the tax credit and Tesla would have less income without the ability to trade their tax credits to “dirtier” manufacturers.
    - 5y ago

nabla9 5y ago

summary: Platform economy can create huge profits if you can lock in the markets. Create moat that keeps competition away. Uber, DoorDash have none of that. Uber's global brand recognition can help with tourists and business travelers who just want familiar, but they are small fraction of the market Uber needs to lock in to justify their market cap. Uber is not like Amazon with returns to scale.

amelius 5y ago
Uber built their castle in Apple's and Google's kingdom. E.g. nothing is stopping Google from offering a competing service, right from within Google Maps, or Android.
- froidpink 5y ago
  Nothing except years of learning of how to launch and operate a non-software service like this properly

kyleblarson 5y ago

Looking at the insider transactions listings for either company I'd say capitalism is treating them quite well: https://finance.yahoo.com/quote/DASH/insider-transactions?p=DASH https://finance.yahoo.com/quote/DASH/insider-transactions?p=... https://finance.yahoo.com/quote/UBER/insider-transactions?p=UBER https://finance.yahoo.com/quote/UBER/insider-transactions?p=...

xyzzy21 5y ago

Ultimately you can NOT "magically" negate "Last Mile Costs" in cities and towns where the Last Mile path distance is enormous. Did my MBA thesis on this subject with the benefit of 20 years of engineering experience. The numbers simply do not work unless you change how cities and residences are built, which would cost far more than you'd ever gain from solving Last Mile costs - the breakeven time is of the order of 100-200 years! The VERY WORST are US-style suburbs. The best would be Asian-style urban - which NO US CITY is other than some parts of Manhattan.

maccolgan 5y ago
>Asian-style urban Do you include India in Asia?
toomuchtodo 5y ago
Would love to read your thesis if you’re willing to share.
- crocodiletears 5y ago
  Seconded
fumar 5y ago
What do you think about last mile delivery robots? https://www.kiwibot.com https://www.kiwibot.com These little bots don't require the same level of human physical presence as Uber or DoorDash.
- ska 5y ago
  > What do you think about last mile delivery robots? I suspect these will need truly significant infrastructure changes to actually function as last mile.
  - randycupertino 5y ago
    Agree! If actual human doordash and instacart delivery people can't read the sign or follow instructions to determine our house from the inlaw apartment, I doubt any robot is going to be able to get it done.

trentnix 5y ago

Steins Law strikes again… “If something can’t go on forever, it won’t.”

roystonvassey 5y ago

If there was any time to be skeptical of Uber's longevity, it is now (at least for me). My experience is anecdotal but I visit my home country every year for a few months and I can clearly notice the declining quality of Uber's services: 1. Vehicles, on average, take at least 10-15 mins longer to get 2. Even if you find a vehicle, 60% of these rides are canceled (either by the driver because they call me and find out they don't want to go that way or they just don't move at all and I'm forced to cancel) 3. After all this, if I am lucky to get into a commute, every driver has complaints about Uber (complaints include intransparent pricing, delays in payments). Most of these drivers are completely dependent on Uber or similar services and have heavy debts that they are now unable to service. 4. Uber's app itself appears to get bloated by the day and while they do appear to make an effort collect my feedback when rides get canceled, not once have I got an impression that the feedback matters at all. Additionally, payment options are numerous but they require me to complete multiple steps to finish which puts me off using it (not Uber's fault I suppose but is part of the riding experience). Given that they are competing against flag-down autos and rides, not to mention public transport and private vehicles (as electric bikes and cars get more popular), I think their model is not sustainable anymore and I expect them to struggle further as riders withdraw and once the demand-supply gap grows further, it's a downward spiral.

sofixa 5y ago
I've been seeing the same thing in Paris. It's gotten very unreliable, often requiring 15+ minutes to get a driver at the very least, and pricing is worse and worse.
bennysomething 5y ago
There's a shortage of drivers (in the UK at least) https://www.bbc.com/news/business-59158230 https://www.bbc.com/news/business-59158230 It's actually getting really noticeable. It used to be easy for me to hail a taxi or get an Uber from a pub, it's next to impossible now
- arcturus17 5y ago
  I haven't read anything like that in Madrid, but I've been noticing it for a couple months now. Rides in central neighborhoods such as Chamberí used to take 2-3min at most, now it's very common to see waits of 7-8min.

LocalH 5y ago

"laws of capitalism" Is that like how in theory, theory is always right over practice, but in practice, practice is always right over theory?

carabiner 5y ago

I just know that when Uber was charging $60 for a ride to the airport (a couple years ago it was half that), my sister found a way to take transit for $3. This was in Seattle.

klaaz0r 5y ago
Exactly same here, I just started using taxi's for longer trips they don't cost more and I have a price upfront. Most people I know use uber in the city for short trips (but I am from Europe)
vkou 5y ago
There are a number of disadvantages to getting to the airport by LINK, especially if you have heavy bags. The more apt comparison is calling a cab to take you to the airport. I've never had to wait more than a few minutes at any hour of day or night, and the pricing is equivalent to Uber.
bradlys 5y ago
Works great if you’re very near transit or can have someone figure out that last mile for you. Works poorly if you’re not. I would take public transit where I live but I’m about 1-2 miles from the nearest bus stop that could get me to the airport (too far to walk with checked luggage). No big lots or houses where I live - people crammed in. The bus is unpredictable and runs infrequently and takes a very long route to get to the airport. (1+hr) If I take the train, I have to go even further walking and then I have to pay something like $9 then make a transfer (more time spent) and pay another $6. The time spent is maybe less than the bus but because of transfer - it can be quite slow. Add in that I’m usually traveling with a partner and I love to get to the airport just as boarding starts and this is a colossal waste of time + money. I pay the $30-35 for a Lyft/Uber and it’s way faster and more reliable. Sometimes cheaper too. It’s like 1/3rd the time spent (20-25min) vs 1.5hr+. Oh and I’m not adding in the unpleasantness of either transit option - just cost and time… I live in the peninsula of SFBA and go to SFO at least twice a year. Seattle has much better options for SeaTac if you’re in the actual city.
- smilekzs 5y ago

yawaworht1978 5y ago

Yeah can't defy nothing with this model. A handful of parasitic wannabe visionaries grabbing as much investor money as fast they can so long the sales pitch sounds ok, meanwhile "disrupting" all laws they can and paying workers less than minimum wage. Seems like the drivers have wisened up in some places.

HockeyPlayer 5y ago

In Mexico last week an Uber was twice the cost of using inDriver. Our driver reported Uber taking 50% of the fare which is why so many users and drivers had switched to inDriver.

aaggarwal 5y ago

I see these articles every now and then over last 5-10 years, but as someone who has followed/worked around this industry in the past, I can tell you that there is enough demand, supply and capital for this industry and it is not going anywhere. All of these companies are EBDITA profitable with decent margins and the net loss is them reinvesting in marketing, product and M&A (from their earnings reports). As the effects of covid wanes, their profits are going to go up very quickly which will be seen over the next year.

gethoht 5y ago

I live in the Denver metro area and have recently travelled several places. Here in Denver rides are 20-50% more expensive than they were pre-pandemic and it takes noticeably longer to get a ride.

shikharraje 5y ago

I don't even mind that there are morons out there who think this kind of business model works. Hell, if you're dumb enough to realize that even hyper-competitive companies like Amazon can't make restaurant delivery work, but still want to invest in Doordash, go ahead. What REALLY gets my goat is how much mental real estate these wannabe entrepreneurs get. Personally, I joined the tech industry because I was more inspired by the smaller, incremental innovations that generated value. Something like CRT TVs becoming razor thin, or mobile phone cameras overtaking traditional cameras in resolution, or the Apple M1 chip/ARM, THAT was what I used to think of when I thought "Innovation". However, smart people around me these days, they have no interest in actually doing hard, innovative things. The definition of "smart" today, is actually to raise a bunch of VC money and get a "net worth". And that makes sense, doesn't it? Why work hard, when you can "generate" "billions" of value with just a Powerpoint slide deck? The end result of all this is that people actually get discouraged from doing the hard work and actually generating real value! Yeah, why should I spend time understanding Supply Chain basics, or studying Operations Research theory? Why should I actually come up with an improved heuristic for Travelling Salesman? Let me just make a shiny Powerpoint, and head on into my first VC meeting.