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This business is a natural monopoly, which is exactly what the VCs understand. There won't be competition, because whoever has the most customers can offer the
by jcampbell1 12y ago
This business is a natural monopoly, which is exactly what the VCs understand. There won't be competition, because whoever has the most customers can offer the best prices to customers, and the most earnings to drivers. The winner can suffocate the competition.
It's basic game theory, if I run an operation that does 10,000 rides a day, and my competitor does 5000 rides per day, I can tweak prices and wait times such that the competing service is strictly inferior for both drivers and passengers.
- prostoalex 12y agoOn-demand business maybe. But pre-arranged car service business (where majority of transactions is airport pick-ups/drop-offs) is very fragmented, and Uber is just another player there. If you don't need on-demand availability, Blacklane.com or Limos.com are consistently cheaper than Uber Black. And if you are okay with waiting for maybe an hour or so, Sidecar is usually a better deal for longer distances.
- jhonovich 12y agoPresuming you can block your drivers from working for rival services simultaneuosly.
- untog 12y agoHardly difficult. Once you have a monopoly position you just add a clause to the terms and conditions that you may only use Uber if it's the only service you're signed into at the time.
- icebraining 12y agoBut how do you get the monopoly position in the first place? Also, that assumes the law doesn't invalidate those clauses.
- untog 12y agoAs I said in the original post, by using VC cash to undercut competition and drive them out of business.
- icebraining 12y agoAnd others can't get VC cash, why?
- untog 12y agoVC cash isn't infinite, and the amount available today won't last indefinitely. And are many VCs really likely to invest in a new startup when Uber just got over a billion dollars of cash? You can be as innovative and disruptive as you want, you're still going to have an extremely hard time beating a company with $1.2bn in the bank.
- nthj 12y agoI always thought Uber avoided such a clause now and would continue to do so in the future, regardless of monopoly status, because their contractors being reclassified as employees would be disastrous to their business model.
- jhonovich 12y agoAnti-trust violation
- icebraining 12y agoBy that logic, all businesses with economies of scale are "natural monopolies". That's nonsense, because it assumes that everything else (particularly income per ride and cost per ride) are the same, or at least that they can be the same at a whim. And in practice, we see smaller companies competing successfully with larger ones all the time.
- pbreit 12y agoThere's a huge liquidity advantage, relatively unique to this market, that is difficult to compete against.
- erispoe 12y agoIndeed, a lot of businesses with economies of scale and network effects can become monopolies. If we want to experience the benefits of free-market and competition, from a consumer point of view, we need to implement it through regulations. Peter Thiel explains it quite well, businesses want monopolies because they can reap a higher share of the value. Competition redistributes value to the customers. Once we recognize this, we can ask where, as a society, it makes sense to foster competition.
- deleted 12y ago[deleted]
- icebraining 12y agoWhich businesses have become monopolies through economies of scale? Can you give me some examples?