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I'm not arguing that Uber is worth $17 billion, but the author completely brushed off the entire reason why investors are valuing it at $17 billion. Only in th

I'm not arguing that Uber is worth $17 billion, but the author completely brushed off the entire reason why investors are valuing it at $17 billion. Only in the last paragraph did he mention that Uber may be looked at as a "logistics" company and not a taxi service. Hello? Of course that's what investors are banking on when they value the company at $17 billion. Uber is not a taxi play, just like Amazon is not just a book seller. A great analogy of this article is when people were saying Amazon wasn't worth $3 billion back in 1997 because the online book market wasn't big enough. Could Uber fail to become a logistics company? Of course. But it's not delusional to think otherwise.

gfodor 12y ago
Agreed this type of analysis of Uber is hilarious, your example is the best I can think of. Imagine an article from 1997 with detailed charts and data around the book market, and using that to question Amazon's business model. It's almost charmingly short-sighted. All you need to know about this article is the phrases "self driving car" and "autonomous car" appear zero times.
- kylebgorman 12y ago
  but "driverless car" does, as you would know if you had RTFA.
  - MarkPNeyer 12y ago
    the dude totally dismisses driverless cars as something that uber could do 'because it hasn't succeeded yet.' they've already spun up 'on demand' services for ice cream, pedi-cabs, mariachi bands, kittens... multiple times. so it's not like they haven't demonstrated they could start new markets. once driverless cars become common, do you really think people will just have their driverless car sitting at home doing nothing all day? wouldn't it be nice if you could hook your driverless car up to a API that would keep it busy and give you a cut of the revenue? uber could do that. so now imagine a world where cars now generate revenue for the people who own them, without them needing to hire a driver, find customers, or do anything besides pay for occasional repairs. 17 billion is a bargain.
    - FireBeyond 12y ago
      they've already spun up 'on demand' services for ice cream, pedi-cabs, mariachi bands, kittens... multiple times. so it's not like they haven't demonstrated they could start new markets. Now, apparently, gimmick/publicity ‘for a day, in one city’ is “showing you are able to start new markets”? Seriously?
- zacharycohn 12y ago
  Uhm... why don't you read paragraph 8 one more time.
- Spooky23 12y ago
  Do VCs have the patience to wait for the availability and legalization of autonomous taxis and transport vehicles? Amazon basically reinvented the Sears catalog for the modern age, it was business mobile known to work.
NoMoreNicksLeft 12y ago
> but the author completely brushed off the entire reason why investors are valuing it at $17 billion. The investors "value" it at $17 billion because there is a remarkable lack of investment opportunities in general, and an unremarkable lack of investment opportunities with the payoff potential that modern investors are chasing. If everyone wants to strike it rich and become the next billionaire (or, if you're already a billionaire, then a multi-billionaire), you'll invest absurd amounts of money into whatever you can find. Mundane opportunities might take decades to double your wealth, if not more. And what else are you going to do, spend it? This doesn't just mean that bizarre concepts that aren't worth anything soon get obscene valuations, it means more modestly smart ideas get obscene valuations too, supposing their true worth is as of yet undetermined. Too much money to invest, not enough opportunities = weird shit.
- xivzgrev 12y ago
  Totally agree - how many opportunities are there for large-scale investment in private companies with the growth Uber has been seeing?
  - NoMoreNicksLeft 12y ago
    Yeh, but how likely is it to payoff as much as they're hoping for organically? My guess is that's pretty close to zero, probability-wise. Which should tend to discourage such investment. The only reason it isn't discouraged is because the behavior of crazy investment becomes its own semi-unintentional pump and dump scheme. The initial investors can strike it rich, even if Uber's not really worth $17 billion in the long run... just so long as the second-wave investors think that it's really worth $20-something billion. Investment really isn't even investment anymore, so much as it is gambling
pkaye 12y ago
Are "logistics" companies valued higher than other industries?
- eli 12y ago
  I have no idea, but spending on logistics is several orders of magnitude larger than on cars for hire.
  - timr 12y ago
    ...because "logistics" includes things like "giant trucks" and "warehouses", neither of which Uber is anywhere near qualified to do. People seem to lose their minds when companies get to a certain growth stage, assuming that "anything is possible now!", while ignoring the overwhelming amount of empirical evidence that the larger a company gets, the less likely it is to make dramatic shifts in business. Moreover, companies that don't focus like a laser on their core business tend to fail.
patrickaljord 12y ago
> I'm not arguing that Uber is worth $17 billion No one is arguing that. Investors are valuing Uber at $17 billion, which means future value, not current worth. I know you know that but many people seem to be confused by high valuation by looking at current revenues which is weird from supposedly tech bloggers. And you're right about its future in logistics too. Huge potential there.
- venomsnake 12y ago
  Don't UPS, FedEx, USPS have much more talent and software already deployed.
  - deleted 12y ago
    [deleted]
- hyperliner 12y ago
  "which means future value, not current worth." No it doesn't. The value is today. If it was some future value different from today's value, then someone would be arbitraging on the difference. Maybe you are trying to say that the value today is based on future performance, which should be obvious.
- Alupis 12y ago
  I believe we are experiencing a Startup Valuation Bubble, evidenced by extreme purchases such as WhatsApp for $16 Billion (and instant messaging company), Oculus for $2 Billion (a research company with no product), SoundCloud, etc, etc etc. While other companies like Satellite companies are selling in the hundreds of millions, not billions. I don't think these gross over-valuations are sustainable. These are all companies that a few years back, would have, at best, sold for a few hundred million.
  - mscarborough 12y ago
    Well of course it's all useless companies, but then how could we suck Graham's and stupid fuck Andreesen's dicks?
RV86 12y ago
Agreed. I found the article's body did not support its thesis for two main reasons: 1) The scenarios in which Uber becomes worth 17B or more based simply on its role in the transportation market didn't seem all that unlikely to me. 2) As you mentioned -- the probability of Uber becoming a major force in Logistics/driverless cars/etc. They've got Google behind them after all and many figure that's the end game -- myself included. It's unfortunate whenever a somewhat reputable outfit like 538 feels the need to clickbait by taking a contrarian position, but then again. I took the bait. Well played, 538.
opendais 12y ago
It isn't delusional to think otherwise. It is, however, very unlikely. http://www.businessweek.com/articles/2014-04-07/with-uber-rush-the-car-service-tests-manhattan-only-courier-service http://www.businessweek.com/articles/2014-04-07/with-uber-ru... $15 to $30 is not a practical delivery service. I can get my whole shopping list from a grocery store delivered same-day for $10. https://www.instacart.com/faq https://www.instacart.com/faq ? $4. Uber has a very, very long way to go before they become a serious competitor in that space.
- ethomson 12y ago
  This isn't for grocery delivery, this is to compete with local couriers, and it's priced accordingly. http://breakawaycourier.com/courier-delivery-rates/ http://breakawaycourier.com/courier-delivery-rates/ quotes $12 minimum in Manhattan (compared to the $15 minimum of Uber's courier service in Manhattan) which is comparable in price. I suspect a bike messenger would be quicker than a car messenger in Manhattan, but that's conjecture. My local grocery store can deliver inexpensively (or even for free) because they're making a hefty markup on my coffee and bottled water. Similarly, Instacart appears to add markup into the price of it's items: "Yes, Instacart prices are our own and vary from the store’s price" (from the site you quote.) So, it seems that $15 to $30 could certainly be a practical delivery service.
  - seventytwo 12y ago
    And the courier market is how big?
    - deleted 12y ago
      [deleted]
  - opendais 12y ago
    You think 25% more expensive is a "comparable price"? I think we'll have to disagree on that. ;) Similarly, the "hefty markup" at my local grocery store is....drum roll please...the same price I pay at the store. Similarly, I can get similar same-day service from other shops in the general area if I buy sufficient quantities of goods. Admittedly, it requires a phone call and slightly more effort but they are frequently willing to split the bill for the courier to make the sale.
latj 12y ago
I have mixed feelings about using Amazon as our model of success. On the one hand, Amazon monopolizes some product categories. It has had almost no net margin for two decades. In those 20 years it has failed to pay a single penny in dividends to stockholders. All of this is not to mention kindle and Amazon's relationship with literary world. On the other hand, people are generally happy with Amazon. Customers like everything funneled into one interface and they eat prime shipping up like candy. I do too. Yum. Its execs and white collar employees generally seem well fed and happy. There are some questions about the conditions of its fulfillment center workers but honestly I think they will all be replaced by robots in the next 10-20 years as robot prices come down. Amazon is a giant corporation governed by an non-democratically elected board operating in very opaque ways. But, Amazon is also essentially a not-for-profit organization that agrees not to get nonprofit tax protection in return for being allowed to operate with less oversight. EDIT: Oh. I just looked it up, it turns out Amazon doesnt pay much tax...
- opendais 12y ago
  I think Amazon is a perfectly reasonable model of success. Even if I don't particularly like Amazon. They succeeded without doing anything unusually unethical in the marketplace. If be relatively average ethically and a corporation worth billions isn't a model for success in a capitalist society, what is? Honestly?
  - latj 12y ago
    Yeah, I think I agree with you. Here is how I score it. * Is the company good for workers? Some fulfillment center workers say "no". From what I know of the company and people who work there I'm going to say a solid "probably yes" it is good for workers. * Is the company good for the owners? I'm saying "no" on this one because the average amazon stockholder has only made money from Amazon by speculating the price would continue to rise as it always has and sold it off at some point. * Is the company good for the customers? It probably does squash out some competition (and thus choice), but overall I'm going to say "yes" it is good for the customers because people generally seem happy with Amazon. * Is the company good for suppliers / producers of content/goods? I honestly cant answer this one. * Is the company good for society? I think I'll say "yes" to this one because they offer competition to other industry giants with AWS, new phone, etc. I am not a fan of kindle or their work in that industry. By the way I like the phrase "unusually unethical".
Alupis 12y ago
> Only in the last paragraph did he mention that Uber may be looked at as a "logistics" company and not a taxi service. You don't buy a company for $17 Billion in hopes of transforming it into something completely different and maybe making money. You also don't buy a company based on future best case scenarios where the competition is projected to stay stagnant. ~~~ At least you didn't used to buy companies based on these criteria. That used to be considered bad business.
general_failure 12y ago
They could even become a FedEx competitor.

gfodor 12y ago

Agreed this type of analysis of Uber is hilarious, your example is the best I can think of. Imagine an article from 1997 with detailed charts and data around the book market, and using that to question Amazon's business model. It's almost charmingly short-sighted. All you need to know about this article is the phrases "self driving car" and "autonomous car" appear zero times.

kylebgorman 12y ago
but "driverless car" does, as you would know if you had RTFA.
- MarkPNeyer 12y ago
  the dude totally dismisses driverless cars as something that uber could do 'because it hasn't succeeded yet.' they've already spun up 'on demand' services for ice cream, pedi-cabs, mariachi bands, kittens... multiple times. so it's not like they haven't demonstrated they could start new markets. once driverless cars become common, do you really think people will just have their driverless car sitting at home doing nothing all day? wouldn't it be nice if you could hook your driverless car up to a API that would keep it busy and give you a cut of the revenue? uber could do that. so now imagine a world where cars now generate revenue for the people who own them, without them needing to hire a driver, find customers, or do anything besides pay for occasional repairs. 17 billion is a bargain.
  - FireBeyond 12y ago
    they've already spun up 'on demand' services for ice cream, pedi-cabs, mariachi bands, kittens... multiple times. so it's not like they haven't demonstrated they could start new markets. Now, apparently, gimmick/publicity ‘for a day, in one city’ is “showing you are able to start new markets”? Seriously?
zacharycohn 12y ago
Uhm... why don't you read paragraph 8 one more time.
Spooky23 12y ago
Do VCs have the patience to wait for the availability and legalization of autonomous taxis and transport vehicles? Amazon basically reinvented the Sears catalog for the modern age, it was business mobile known to work.

NoMoreNicksLeft 12y ago

> but the author completely brushed off the entire reason why investors are valuing it at $17 billion. The investors "value" it at $17 billion because there is a remarkable lack of investment opportunities in general, and an unremarkable lack of investment opportunities with the payoff potential that modern investors are chasing. If everyone wants to strike it rich and become the next billionaire (or, if you're already a billionaire, then a multi-billionaire), you'll invest absurd amounts of money into whatever you can find. Mundane opportunities might take decades to double your wealth, if not more. And what else are you going to do, spend it? This doesn't just mean that bizarre concepts that aren't worth anything soon get obscene valuations, it means more modestly smart ideas get obscene valuations too, supposing their true worth is as of yet undetermined. Too much money to invest, not enough opportunities = weird shit.

xivzgrev 12y ago
Totally agree - how many opportunities are there for large-scale investment in private companies with the growth Uber has been seeing?
- NoMoreNicksLeft 12y ago
  Yeh, but how likely is it to payoff as much as they're hoping for organically? My guess is that's pretty close to zero, probability-wise. Which should tend to discourage such investment. The only reason it isn't discouraged is because the behavior of crazy investment becomes its own semi-unintentional pump and dump scheme. The initial investors can strike it rich, even if Uber's not really worth $17 billion in the long run... just so long as the second-wave investors think that it's really worth $20-something billion. Investment really isn't even investment anymore, so much as it is gambling

pkaye 12y ago

Are "logistics" companies valued higher than other industries?

eli 12y ago
I have no idea, but spending on logistics is several orders of magnitude larger than on cars for hire.
- timr 12y ago
  ...because "logistics" includes things like "giant trucks" and "warehouses", neither of which Uber is anywhere near qualified to do. People seem to lose their minds when companies get to a certain growth stage, assuming that "anything is possible now!", while ignoring the overwhelming amount of empirical evidence that the larger a company gets, the less likely it is to make dramatic shifts in business. Moreover, companies that don't focus like a laser on their core business tend to fail.

patrickaljord 12y ago

> I'm not arguing that Uber is worth $17 billion No one is arguing that. Investors are valuing Uber at $17 billion, which means future value, not current worth. I know you know that but many people seem to be confused by high valuation by looking at current revenues which is weird from supposedly tech bloggers. And you're right about its future in logistics too. Huge potential there.

venomsnake 12y ago
Don't UPS, FedEx, USPS have much more talent and software already deployed.
- deleted 12y ago
  [deleted]
hyperliner 12y ago
"which means future value, not current worth." No it doesn't. The value is today. If it was some future value different from today's value, then someone would be arbitraging on the difference. Maybe you are trying to say that the value today is based on future performance, which should be obvious.
Alupis 12y ago
I believe we are experiencing a Startup Valuation Bubble, evidenced by extreme purchases such as WhatsApp for $16 Billion (and instant messaging company), Oculus for $2 Billion (a research company with no product), SoundCloud, etc, etc etc. While other companies like Satellite companies are selling in the hundreds of millions, not billions. I don't think these gross over-valuations are sustainable. These are all companies that a few years back, would have, at best, sold for a few hundred million.
- mscarborough 12y ago
  Well of course it's all useless companies, but then how could we suck Graham's and stupid fuck Andreesen's dicks?

RV86 12y ago

Agreed. I found the article's body did not support its thesis for two main reasons: 1) The scenarios in which Uber becomes worth 17B or more based simply on its role in the transportation market didn't seem all that unlikely to me. 2) As you mentioned -- the probability of Uber becoming a major force in Logistics/driverless cars/etc. They've got Google behind them after all and many figure that's the end game -- myself included. It's unfortunate whenever a somewhat reputable outfit like 538 feels the need to clickbait by taking a contrarian position, but then again. I took the bait. Well played, 538.

opendais 12y ago

It isn't delusional to think otherwise. It is, however, very unlikely. http://www.businessweek.com/articles/2014-04-07/with-uber-rush-the-car-service-tests-manhattan-only-courier-service http://www.businessweek.com/articles/2014-04-07/with-uber-ru... $15 to $30 is not a practical delivery service. I can get my whole shopping list from a grocery store delivered same-day for $10. https://www.instacart.com/faq https://www.instacart.com/faq ? $4. Uber has a very, very long way to go before they become a serious competitor in that space.

ethomson 12y ago
This isn't for grocery delivery, this is to compete with local couriers, and it's priced accordingly. http://breakawaycourier.com/courier-delivery-rates/ http://breakawaycourier.com/courier-delivery-rates/ quotes $12 minimum in Manhattan (compared to the $15 minimum of Uber's courier service in Manhattan) which is comparable in price. I suspect a bike messenger would be quicker than a car messenger in Manhattan, but that's conjecture. My local grocery store can deliver inexpensively (or even for free) because they're making a hefty markup on my coffee and bottled water. Similarly, Instacart appears to add markup into the price of it's items: "Yes, Instacart prices are our own and vary from the store’s price" (from the site you quote.) So, it seems that $15 to $30 could certainly be a practical delivery service.
- seventytwo 12y ago
  And the courier market is how big?
  - deleted 12y ago
    [deleted]
- opendais 12y ago
  You think 25% more expensive is a "comparable price"? I think we'll have to disagree on that. ;) Similarly, the "hefty markup" at my local grocery store is....drum roll please...the same price I pay at the store. Similarly, I can get similar same-day service from other shops in the general area if I buy sufficient quantities of goods. Admittedly, it requires a phone call and slightly more effort but they are frequently willing to split the bill for the courier to make the sale.

latj 12y ago

I have mixed feelings about using Amazon as our model of success. On the one hand, Amazon monopolizes some product categories. It has had almost no net margin for two decades. In those 20 years it has failed to pay a single penny in dividends to stockholders. All of this is not to mention kindle and Amazon's relationship with literary world. On the other hand, people are generally happy with Amazon. Customers like everything funneled into one interface and they eat prime shipping up like candy. I do too. Yum. Its execs and white collar employees generally seem well fed and happy. There are some questions about the conditions of its fulfillment center workers but honestly I think they will all be replaced by robots in the next 10-20 years as robot prices come down. Amazon is a giant corporation governed by an non-democratically elected board operating in very opaque ways. But, Amazon is also essentially a not-for-profit organization that agrees not to get nonprofit tax protection in return for being allowed to operate with less oversight. EDIT: Oh. I just looked it up, it turns out Amazon doesnt pay much tax...

opendais 12y ago
I think Amazon is a perfectly reasonable model of success. Even if I don't particularly like Amazon. They succeeded without doing anything unusually unethical in the marketplace. If be relatively average ethically and a corporation worth billions isn't a model for success in a capitalist society, what is? Honestly?
- latj 12y ago
  Yeah, I think I agree with you. Here is how I score it. * Is the company good for workers? Some fulfillment center workers say "no". From what I know of the company and people who work there I'm going to say a solid "probably yes" it is good for workers. * Is the company good for the owners? I'm saying "no" on this one because the average amazon stockholder has only made money from Amazon by speculating the price would continue to rise as it always has and sold it off at some point. * Is the company good for the customers? It probably does squash out some competition (and thus choice), but overall I'm going to say "yes" it is good for the customers because people generally seem happy with Amazon. * Is the company good for suppliers / producers of content/goods? I honestly cant answer this one. * Is the company good for society? I think I'll say "yes" to this one because they offer competition to other industry giants with AWS, new phone, etc. I am not a fan of kindle or their work in that industry. By the way I like the phrase "unusually unethical".

Alupis 12y ago

> Only in the last paragraph did he mention that Uber may be looked at as a "logistics" company and not a taxi service. You don't buy a company for $17 Billion in hopes of transforming it into something completely different and maybe making money. You also don't buy a company based on future best case scenarios where the competition is projected to stay stagnant. ~~~ At least you didn't used to buy companies based on these criteria. That used to be considered bad business.

general_failure 12y ago

They could even become a FedEx competitor.