Uber is an example of what happens when central banks attempt to 'stimulate' the economy through misguided central planning. By forcing down interest rates and essentially moving spending from the future into the present, they're stimulating investment in general. But what they forget (or more likely, choose to ignore) is that investments can be just bad investments.
Uber is a bad investment. There is no barrier to entry in ride sharing. Drivers can install multiple hailing apps. Riders can too. Building a real time ridesharing engine is not hard - I did it once as a prototype years ago but it was unfortunately in the pre-smartphone era and you had to find ride matches using your regular computer.
So central banks print money in order to buy up safe investments. That forces institutional investors to pour their money into risky investments like venture capital firms. VC firms look around at a field with slim pickings but that torrent of money has to go somewhere, so it ends up being used to fight vast unsustainable price wars. And in the end people's savings that they will depend on in retirement don't end up invested in productive assets that'll yield ROI into the future .... their money ends up subsidising a 10 minute taxi ride and being lost forever.
The people who run Uber may feel that they 'have' to do this otherwise their competitors would do so instead, but that just reinforces how hopeless the situation is: they know perfectly well that their main competitive advantage is illusory, or at best, is merely a result of better access to capital flows. All it'll take is a sustained set of interest rate hikes and the end of QE, and suddenly Uber will have to charge the real underlying market rates. How will it end?
I don't disagree with your main argument, but I'd say there's at least some barrier to entry. The market definitely has some network effects. More drivers in the network makes it faster to get a ride and therefore more attractive to riders. Vice versa more riders makes it more attractive to drivers to be on Uber's network.
As you point out, drivers and riders can install multiple apps (and they often do, e.g. Lyft), but for a competitor to enter they'll likely need to jumpstart their network. Something which they'll likely have to do by subsidizing both drivers and riders. This means that whoever decides to take on Uber would probably need quite a big war chest themselves.
I think it's more accurate to say that there is some barrier to entry, but maybe the barrier is not as high as Uber needs it to be.
When Lyft launched here in NYC it was pretty dead, and they lost the initiative with the initial batch of riders. They've since rallied around driver recruiting and now the service is good. Everyone I know here has multiple ride hailing apps installed, and multiple services are competitive with Uber re: driver availability.
So yeah, it's not trivially easy to get into this game, but it's also not absurdly difficult - you need someone with deep pockets, but not that deep. This is especially true because Uber's network effect between markets is pretty minimal - people mostly take rides in their home market, so it's easy for upstarts to compete for a single market without the pressure to take themselves global immediately.
One structural weakness on Uber's part (and Lyft's, too) is that their commissions are still quite high (20-25%?) and this gives a lot of room for competition. Juno launched here successfully simply by undercutting the commission.
I actually completely agree with all your points. I didn't mean to say these are insurmountable barriers, just to provide some counterweight to the argument there are no barriers to entry. One particular weakness you and others called out is that the network is mainly split into separate cities. So a competitor doesn't need to compete with Uber globally, but could just target a single city.
Additionally once Uber reached monopoly status and started raising prices, it would become more attractive to new entrants to enter the market. So even if Uber managed to beat all their competitors they still would have a price ceiling. All in all I think Uber provides a valuable service and can probably turn itself into a (very) profitable business, but I'm not convinced it will ever be the undisputed leader of all things transport that its current valuation seems to imply.
Yea, as soon as a rider fails to get a ride on one app they look elsewhere (that's how I tried Lyft for the first time and had a great experience).
With the legal barriers in place, I was incredibly impressed with Austin's Ride Austin arrangement. Incentivizing drivers to keep more money in their pocket is going to be pretty damn compelling and unique legal environments encourage new entrants.
Uber has an incredible brand and has become the "google it" of ride sharing. That's very valuable and defensible but it risks becoming a colloquial "kleenex" for ride sharing.
Uber takes $1.55 off the top for a booking fee and then 28% of the remaining fare. On a short trip it ends up being about 50% of the total. Of course they don't tell you that when they advertise that drivers make $19/hr (in fares). Lyft charges the same $1.55 fee and takes 25%.
Yes, there are lots of those, because the travel industry realized people want to compare offerings before they make their priciest purchase of the year. Customers would themselves do manually what all those aggregator sites do automatically and they care less about who they are dealing with and more about the price tag.
In comparison, a taxi ride might not even be the priciest purchase of the day.
Uber penetration is very low, a lot of cities don't have their serviços available so others can occupy these spaces without worrying with network effect at all. Uber is doomed.
I disagree with your main argument. Uber is buying growth, and it is buying growth that yields network effects. I live in the Bay Area and yes uber prices have been ridiculously low and they stayed the same for long. However one thing changed; now I see other riders sitting next to me while I pay the same price I always paid for UberX. Demand enables pooling. Network effect in pooling is obvious.
You are also dismissing the fact that traditional cab companies are going out of business. My main counter argument against"there isn't innovation on uber anymore" would be simply pointing out what is happening to traditional players. I don't think they are coming back with the new rules of the market, any they were forced to leave this early because uber "bought" growth.
Uber is unsustainable, both the core business and for the drivers. They've survived this long because they were able to dance around regulations and take advantage of drivers. But things are changing: insurance companies are onto drivers and governments are onto the businesses. All of this is going to drive up costs. They are gambling on surviving longer than traditional taxi companies can.
Economics are not in their favor. There's a reason taxi service is expensive. It's hard enough to provide cost-effective public transportation, much less private transport.
Once driverless cars hit the streets, then the calculus changes a bit. But that's when the competition will really begin. What's more likely is Google/Amazon will create (or acquire) a driving service broker that will automatically hail for you from whatever service will offer the ride cheapest (and probably won't even take a commission).
For less regulated cities, sure. For the more famous ones such as NYC and Boston, it's because there are a fixed number of permanent licenses owned by rent-seekers who lobby the city government to keep it that way.
While there is definitely rent-seeking to combat, it's also true that the restricted-supply exists because we already tried the unregulated version and ran into problems. At one point it was creating painful costs (e.g. congestion) which were externalized onto everybody else.
Hmmm... Uber is basically unregulated. Whoever wants to drive for Uber can. Why hasn't the system imploded yet? Why isn't it solid gridlock in NYC due to too many Uber cars?
It is buying growth for the rideshare business model. Google, Tesla or anyone can piggyback on their work once the model matures and kinks get sorted out- at least until Uber builds a moat from driverless cars.
I have a half-baked theory that much of the 20th century's prosperity came from spillover gains from "malinvestment". Things which are socially useful, but it turns out not to be possible to capture their value in the market. The big example is railways - all the original investors lost their money.
What if there are no profitable "normal" capital investments left in the west, other than asset price bubbling?
I seem to remember reading that something similar happened with fiber optic cable in the nineties. Companies like Qwest (I think? Something like that?) Laid down thousands of miles of fiber, but went under in the dot com bubble. The fiber was then bought up on the cheap, bringing down transmission costs.
My recolection is hazy, so I might be totally wrong.
(The railway mania wikipedia page even blames low interest rates for it! Personally I'm of the opinion that the government can set its bond coupons to whatever it likes and investors are not owed a minimum return, but there we go)
Edit: since the original comment was quite popular, I'll make some forward-looking statements: there is likewise a lot of investment which needs to be done in order to decarbonise, has major social benefits, but will not necessarily be profitable in the market. Even the highly distorted market that is energy. It may turn out that substantial negative interest rates are needed to finance the transition.
Built a half Billion dollar express railway line from airport to downtown, funded 100% by taxpayers, and no one was riding it because the fares were too expensive. Had to lower fares and now it's bleeding money (but people are riding it).
Is it because there was not enough demand from consumers to justify the cost, but that rail was too important a piece of infrastructure that it couldn't just go away? I mean the top performing asset class for Berkshire Hathaway had been railway for a long time, albeit carriers not rail infrastructure.
>The railway mania wikipedia page even blames low interest rates for it! Personally I'm of the opinion that the government can set its bond coupons to whatever it likes and investors are not owed a minimum return, but there we go
> what they forget (or more likely, choose to ignore) is that investments can be just bad investments
Do you have evidence that someone forgot or ignored this issue? Quotes from a particular central banker, for example? I don't think this part informs the conversation.
The question you raise, while maybe novel to some of us on HN, has been long discussed and examined in economics. There are indicators of over-investment and under-investment, and trade-offs to different central bank financial tools.
Finally, because a central bank tool increases investment, that doesn't mean the level of investment becomes too high; it could have been too low before. It's like watering a plant; it might help or depending on its prior condition the same action might over-water or under-water it. One sign there is under-investment, as I understand it, is that extremely low/negative interest rates are not stimulating inflation. This suggests plenty of under-utilized capacity.
By definition it's hard to quote someone who isn't talking about something :)
I've read speeches by central bankers. They almost never think in terms of high or low quality investments. Instead they only see the negative impact of easy money through the lens of inflation, but this is a problem because the inflation statistics they monitor don't include the prices they're impacting, hence the "mystery" of low interest rates coupled with low inflation. The inflation exists, it's just inflation in the cost of equities, houses, the cost of yield or other things that aren't consumer goods.
> Uber is an example of what happens when central banks attempt to 'stimulate' the economy through misguided central planning. By forcing down interest rates and essentially moving spending from the future into the present, they're stimulating investment in general. But what they forget (or more likely, choose to ignore) is that investments can be just bad investments.
How do you explain things like the .com boom when interest rates were "normal"? Uber has raised a lot of money, but it's a drop in the bucket in the world of global finance (and a very small drop at that!).
I never claimed low interest rates were the only trigger for malinvestment! Just look at the south sea bubble. The dotcom boom was mis-spending by retail investors, rooted in ignorance of new technology combined with enormous hype. But because it was a fundamentally market driven boom, it ended relatively quickly with a large correction. This time it's different: it's a deliberately engineered wave of malinvestment caused by government policy. And they happily admit it!
It's not just Uber of course. There is tons of money flooding into questionable tech startups with no end in sight. In 2014 bitcoin companies alone had received more investment money than the whole internet did in 1996. It's an industry wide phenomenon.
> It's not just Uber of course. There is tons of money flooding into questionable tech startups with no end in sight. In 2014 bitcoin companies alone had received more investment money than the whole internet did in 1996. It's an industry wide phenomenon.
The total amount of VC money invested in the US in 2015 was $58.8b [1]. That is less than the operating income of Apple. It is a lot of money in some respects, but the potential rewards are also huge (look at Apple!). I think the huge valuations have more to do with the huge potential for global businesses than whatever Yellen is doing with interest rates.
The internet was a completely different place in 1996, I don't think any fair comparison can be made regarding investment. Something like a billion daily active users and the cash that can generate wasn't a possibility. The whole internet advertising business in 1996 was estimated at $267m [2] which is less than Google now brings in PER DAY (~$283m).
How do you explain things like the .com boom when interest rates were "normal"?
The answer is always going to be some variation of "the goshdurned gubmint". Maybe interest rates, maybe someone read Greenspan's tea leaves which he deliberately left sitting out to cause "malinvestment", maybe something else entirely.
Wow, that's a roundabout justification. You don't need low interest rates for people to make stupid investments.
Uber could just as easily be an example of what happens when the weather is nice and we grow a surplus of food and food prices fall and therefore people spend their remaining capital on bad investments like Uber.
But it makes ordinary safe investments like bonds return unappetizing, even negative rates. So you can't put your billions in bonds. You look for high yield on something like Uber.
so all else being equal cheap money shouldn't increase the proportion of stupid investments
All else isn't equal because it's not a free market. You can't just say "Oh, Uber looks good, I think I'll invest in them." It's not even rivalrous, it's simply private.
So, cheap investor money has to find an outlet some other way.
I agree. Transportation companies just don't tend to be profitable. Airlines are super competitive and minimally profitable. The airlines folks have a saying- they can only be as profitable as their dumbest competitor- and these are people that actually own or lease their planes and have airports and routes granted to them. Even monopolies like taxi cab companies weren't that profitable if you consider the costs of the medallions. Its just hard to make money in transport- drivers make peanuts, car companies have razor thin margins, oil is too volatile, customers are too cost-conscious. Very different than enterprise software or pharma.
Airlines have had trouble with this for a long time. "The Sporty Game", by John Newhouse (1982) tells this story from the aircraft builder perspective. Over the history of airlines, the industry was a net financial lose. As of 1982, the only aircraft product lines to make money were the Boeing 727 (because so many were made) and the 747 (because it was so big).
The US used to have a highly regulated airline industry. The Civil Aeronautics Board decided who could fly where. Then came airline deregulation. Suddenly there were lots of new airlines, most of which went bust. Now we have fewer airlines than before deregulation, worse service, and constantly changing fares. On the aircraft side, airlines are buying new copies of the antiquated Boeing 737, because it's cheap. The B-757 and B-767 are being phased out in favor of the old, narrow 737.
Even if Uber winds up a bust, the money they've paid drivers is really money which was used to buy real things in the economy. Since most countries have been unable to pass actual (or enough) fiscal policy, the only tool left to fight off a sluggish economy is monetary policy. I for one don't mind if the investor class bleeds some money because they can't afford (meaning the returns are too low) to invest in "safe" asset classes.
Of setting up a global operation like Uber? Of course. My point is that there's no special competitive edge in building that kind of app. It's not like a search engine or another process node improvement in CPU design, where it takes armies of specialists. The hard part of Uber isn't the technology, which anyone can do, it's taking on the regulators.
So the VC's might lose money. But if the central bank is aiming for a bigger picture, Uber and Lyft have been great improvements on the market/society/efficiency overall. A car picks me up in 1-2 minutes, instead of the 10 minutes a taxi used to take. And it actually comes - taxis in SF have always been unreliable.
And instead of most cabs driving around aimlessly empty half the time burning fossil fuels, now you have the majority of Uber cars carrying at least 1 customer (sometimes 2 or 3 with UberPool/Lyft Line) most of the time.
All that's really happened is that Uber side stepped some of your shitty laws. The efficiency gains, etc is all bullshit, not much has changed here in the UK apart from now you can use an app rather than a phone call. They turn up a minute or two quicker, wow. Uber are subsidising our rides a bit at the moment so it's like 20% cheaper for now. I hear prices go up after a year or two.
As for taxis during peak time, rich people can now pay more for priority pickups with surge pricing. That's not a plus for society, it's a plus for rich people.
In the US, I could always make a phone call asking for a taxi. They would tell me it'll arrive in 90 minutes, and the odds were 50:50 it would never arrive at all. That's not because of any shitty law, that's just gross incompetence in incenting their drivers.
Not only rich people but poor people who are really in a hurry. If you're suddenly about to be late for work, it's probably better to pay surge pricing than get fired. Of course it's not entirely fair since a rich person can afford to treat more trips as important than a poor person, but it's still better than the traditional system which is a gamble and ignores priorities of riders.
But don't you know, if you make things easier for rich people, the benefits trickle down. Or is the argument currently that people who can't afford the inflated prices don't deserve transport? Not sure.
There's also the basic observation that many big companies that provide valuable products and services pay rich people lots of money to run them or compensate them for their financial help. Would there be an Uber at all without anyone getting rich off it?
Another observation - when we need a doctor or a lawyer, we find their contributions to us to be worth so much we'll pay them more than we pay a cleaner. After all, we could do the cleaning ourselves if we had to but the barrier to start operating on ourselves or writing our own contracts is higher and those rich people have invested work in overcoming that barrier so they could provide those services to people who can't.
Isn't that basically what you'd expect with a progressive tax system? Paying taxes is not the only way to contribute to society -- almost all the money people earn do to some extent, through taxes, and consumption, and investments, etc. Which contributes more I don't know. That's why I was hoping for a citation.
To your second point, there is evidence that CEO performance is negatively related to their pay: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1572085. Measuring competence is difficult, wealth is a appealing proxy but maybe not that reliable.
It's been the other way for me. Uber/Lyft says a car is two minutes away, but it takes 5-10 between DC traffic and driver confusion. It's refreshing to just hop into the can that's waiting on the corner (cabs in DC are pretty readily available).
The only reason I don't use taxis is because I love paying $1-5 to commute across DC in an Uber/Lyft.
> A car picks me up in 1-2 minutes, instead of the 10 minutes a taxi used to take.
The Phoenix metro area is quite spread out. Even so, I averaged about 7 minutes to my passengers' pickup location. This included the time it took to enter the address into my phone's navigation software. Sometimes I'd arrive seconds after the passenger hung up the phone with our dispatchers.
The taxi company's latest version of its dispatching software has all the latest features, but these were not available in 2004 or in 2008, when the old computer hardware was deployed.
> And it actually comes - taxis in SF have always been unreliable.
The cab company I drove for wasn't the cheapest company in town, but we had a reputation for being reliable. The other big companies were okay too, if you weren't in an outlying area. One time a passenger told me how he'd called a random company in the phone book. They said he was too far out of that small cab company's usual area, and to just call the company I drove for.
> And instead of most cabs driving around aimlessly empty half the time burning fossil fuels,
Where does this idea come from? The only times I was empty was in slow period during the middle of the night.
The cab company I drove for bought its first Prius in 2004. Sometime in 2013 or 2014 they retired the rest of the Crown Victorias (old police cruisers), switching the fleet to a 70/30 blend of Priuses and Minivans.
The fleet was very well maintained. The vehicles were cleaned regularly, and repaired as needed. An extensive rejeuvination was performed at mid-life, which is around 200,000 miles. The cabs were looked at very carefully at 400,000 miles - most of them were sent to the boneyard at this point. The owner-operator I drove for took very good care of her cab - it probably made it to 500,000 miles, which is the state-mandated retirement age for taxis. Replacing the battery pack twice, fixing a head gasket, and replacing the original engine with a recycled engine was cheaper than buying a new cab.
The upstarts' unfortunate drivers don't have access to economies of scale for taking care of their vehicles.
Throwing cars away at 200,000 miles [1] is much more "carbon-intensive" than maintaining them for 400,000+ miles.
I appreciate that you're a good and honest cab driver. My experience with cabs tells me that people such as yourself are actually quite rare, and things that are very common:
1. Long wait times for adhoc pickup requests.
2. Taking questionable / long routes to things.
3. Making it difficult to pay with a credit card and expecting a tip no matter what.
4. No real recourse against bad drivers. Have a complaint? Who cares!
No it isn't - all it does is shift spending around. Money that could have been saved and spent later is being spent now in the hope that it'll create something of long term value that'll pay off more than invested. This is 'stimulation' in the same way that spiking yourself with coffee in the morning doesn't actually give you more energy in total, it just makes you feel more awake in the present at the expense of needing more recovery later.
Is Uber such a case? Maybe if it ends up with a long term, world wide monopoly on self driving taxi networks. But right now it's ultimately just a taxi firm that's burning vast sums of money giving people cheap rides. It's literally just throwing pensions and university donations onto the street without any plan for how to get that money back.
Yes! Too many people apply household economics to the state.
If anything has been proven since the GFC it's that Keynsian stimulus works (when it is supposed to be used not all the time, e.g. in a liquidity trap, i.e. now)
Adding to this, food delivery startups are another great example of this. I call them "VC subsidized lunches." Me and my friends installed half a dozen apps, each of which have given anywhere from $25 - $500 (!) in promotions, i.e. free lunches.
The irony was having actual lunch with investors in which they didn't pick up the tab...
What does "moving spending from the future to the present" actually mean in Uber's case?
For many kinds of spending, the future and the present aren't in competition. Keeping cars and people idle today won't result in more cars and labor available tomorrow.
If Uber weren't around, maybe the people writing software and driving cars could be doing something more useful. But that's competition between two different investments in the present, not between the future and the present.
If anything, low interest rates encourage people to speculate on bets that might pay off later rather than on surer bets that will pay off sooner. So that's the (possibly mythical) future competing with the (actual) present.
It means that instead of saving money to be spent later e.g. in retirement, the money is being spent right now in the hope of positive (inflation beating) ROI later.
But what if those investments don't work out? Then you have no savings and won't be able to spend money in the future.
Being able to save money for the long term is fundamental in a society that has long lifespans. Unfortunately government policy is to essentially forbid saving, because forcing people to "invest" their savings pumps employment and GDP stats, which is largely how their success is measured.
Interest rates just explain why there's money looking for a better return. But why invest in Uber as opposed to other start-ups? And why invest in start-ups at all as opposed to property or existing companies that are available at lower P/E values?
The answer seems to be that many people feel Uber is a decent investment compared to alternatives. If Uber ended up owning some share of self-driving transportation that choice might look prescient or at least not so hard to understand. Something analogous has happened at Amazon, where an unrelated business--AWS--now seems to be driving profitability
> The answer seems to be that many people feel Uber is a decent investment compared to alternatives.
Yes, but I'm not convinced they think this for sensible reasons. People follow a herd mentality, and invest in Uber simply because others are doing so - if that many people are doing it, it must be a sure thing, right?
I don't think you ever have full visibility into something as speculative as Uber so following the herd is understandable even if it's not likely to yield big returns for most people. Also, I would not discount early investors assuming they can sell out before the levee breaks. That seems pretty rational.
> There is no barrier to entry in ride sharing. Drivers can install multiple hailing apps.
Some ride sharing companies offer bonuses to drivers based on number of rides now. For example, 50 rides in a week $250 bonus at the end of that week. Using multiple apps interferes with a driver's ability to get the bonus. Many drivers use multiple apps anyways, maybe don't drive enough to get the bonus anyways, etc... but the dominant companies do have tools at their disposal to help mitigate the risk of newcomers quickly taking over a market.
>Uber is a bad investment. There is no barrier to entry in ride sharing.
Uber's size is only a benefit for drawing in tourists from other cities, each market is a separate battleground and you only need to beat Uber in your local market. And what prevents some city from setting up its own government sanctioned/required ride sharing market & app.
> their money ends up subsidising a 10 minute taxi ride and being lost forever.
What? Uber is just a black hole? What about the driver? Who received most of that money for their services? That driver can now use that money to invest in the way they wish.
No, obviously zigzigzag was describing the perspective of the investors. The implication is that their return on investment is lower than the investment, i.e. their money is "lost forever".
Rather expensive way to get a lift. It would be cheaper to save the money until you need a ride, then build a bonfire out of cash to attract attention and hail a cab.
Uber will be one of the first companies to a $1T valuation. (First two will be Facebook and Apple).
Here's why. Uber isn't about ride-sharing, at all. Uber is about rewriting your idea of needing a car. The market they're going after is literally automotive industry.
So right now, they're burning money hand over fist, but they don't /need/ to be doing that. It's a strategic choice, to drown their competitors (see Amazon, that's exactly what they do by tapping good sources of financing in the past). Uber will continue to do so until it is not viable to compete with them.
The only companies that will be able to compete is one with infrastructre and rivers of gold. Google. Google owns all the data of Ubers (maps), and they've got everyone on their own maps, they've got hundreds of millions of users that are tied into a google profile in some capacity (gmail/youtube/etc...) and a lot with linked credit cards. This makes for the biggest threat to Uber. Google can afford to lose, and Uber not buying Lyft is going to be the only potential down fall of the company. If Google buys them (which I don't think they will) then that is the headshot on Uber unfortunately.
Back to my point, basically Uber is going to burn and burn while capital is cheap, and force other players out. Makes sense. They can stop subsidizing their rides for users once they've bullied out the others, and there we end up with decently priced normal rides (Which is still ridiculously better in price and experience than a taxi). But by the time this happens (3 years-ish) Autonomous vehicles will be making their ways into cities at much more capacity. This will reduce their costs significantly, and all these price points they have which they have to pay for, will pay for itself by autonomous tech (instead of just forking out their own money to make our rides $5, the lack of labor because of the autonomous vehicles will force the COGS down essentially).
People will have a huge uproar at Uber for creating and then cutting hundreds of thousands of jobs (the drivers) - But their service and value add of an autonomous driving network will wash away everyones humanity side because it's just "too good". Leaving them in the tallest tower in the city with a penthouse office and a cat sitting on Travis' lap while he looks out the window down onto his autonomous city laughing in an evil tone.
$1T company, without fail.
RE Groupon:
Groupon as compared to in the article is a different situation. Groupon had minimal barriers to entry and is only a sales machine. People, people, people, and more people were needed in order to bring in the next deal, the next bargain, etc... Uber is absolutely incomparable as they have an innovation in technology, financial defensibility, and humungous footprint of recurring revenue. Groupon had none of those so I feel the article writer putting that out there doesn't seem like a just example. The only thing they have in common is that they're losing money.
Why Uber? What do they really have, at the end of the day? They're one of several companies investing in driverless cars. They're competing with companies that have cash cows (e.g. Google and Apple) as well as companies with a century+ of car-making experience, from the ground up. Uber has a cool app and some name recognition.
If/when self-driving cars are a thing, why does anyone need uber? GM/Ford/Toyota/whomever all make their own cars and will presumably make the cars of tomorrow. If not, Tesla would be a solid bet. Again, all companies that MAKE cars. Apple & Google are probably betting on their technology being better and licensing it to manufacturers. Why would Uber have a better shot at any of this than the other players? They have a slick app and have successfully found a grey area where they push most liability and upkeep costs onto their not-employees. In some markets, by some measure, maybe they're profitable.
Now what? To get to $1T is either going to take a monumental shift in everything they've accomplished, or it's going to take some silly investors (or financial tricks). I'd say it's much more likely that in 15 years we look back at Uber as something closer to WebVan than they get a $1T market cap.
The value of Uber is not in it's app, it's design or any of that. That's all bs cosmetics stuff. The value is in it's execution, infrastructure, and processes.
Tesla - Doesn't make nearly enough cars to even be considered in the same spectrum of any other of the players. Autonomous, great. Ride sharing/micro-logistics infrastructure? Not enough strength unfortunately.
GM/Ford/Toyota - Great, they've got cars, let's say those cars are autonomous. Now what about the logistics management that they've got zero experience in? Uber has serviced millions of rides and learned and learned from that. The tech is not enough, the experience/data is what counts imo.
Any company looking to just "jump in" because they've got money and a car, is going to get vaporized, unless they've got data and resources (Google being the only one that fits this mould imo).
Just how Facebook and Google got vaporized in the "daily deal" market. They had more access to the businesses, and more access to consumers than the daily deal sites ever could. Yet they struggled to find any kind of market share. Another example is Google Shopping.
Resources aren't the only thing needed, experience and processes. Which is why I say that Google is a threat, but if they're buying out Lyft. Otherwise, Google will potentially compete, but more than likely cater to a different segment than what Uber does.
Time will tell I suppose :) Definitely see what you're saying, but I just don't think you're focusing on the most valuable pieces of Ubers business.
Either way, we're very fortunate to even be in a position to discuss such cool stuff! Exciting for sure :)
Although unlikely, Uber might actually rewrite the auto industry. Investors are essentially playing roulette with Uber, and view the company as a potentially huge payout, although with low odds. As an illustration, investors might model a 12% chance of $500B, and model a 88% chance of bankruptcy, which would be $60 Billion of valuation.
I hate the news posted here and elsewhere about Lyft's struggles. I've found their drivers to be far friendlier and, afaik, their business practices far less sketchy than Uber in the past.
I generally agree that flooding the market might lead to stupid investments. Two points:
> That forces institutional investors to pour their money into risky investments like venture capital firms.
Are there statistics about this? Is this really the case? What is the percentage of VC compared to the rest? I only have a vague feeling that VC is tiny compared to private equitiy and even tinier compared to Wallstreet.
> their money ends up subsidising a 10 minute taxi ride and being lost forever
That actually seems like a good thing. People with capital subsidising basic services for the general population. Wealth generally has the tendency to move in the other direction.
People with capital subsidising basic services is not a good thing because pensions are so widespread - the subsidy is essentially coming from the same people taking the ride in the first place, just via an incredibly high overhead and roundabout trip!
This bloomberg article says that something like 30% of VC money came from pensions in 2014, 2/3 of that from public pensions. Perhaps a couple percent more, because funds of funds were a large contributor.
It makes a very convincing argument that VC is a bad investment vehicle for pensions, but I can't draw the line from this article to pensions are subsidizing basic services.
Certainly with Uber, it's largely Saudi Arabia right now that's subsidizing riders. That is a very circuitous path for the Saudis to benefit or enrich their subjects, but everyone else in the uber world is benefiting.
It's actually fundamental to Portfolio management theory. [0]
> That actually seems like a good thing.
Maybe, I don't know. Uber engages in some aggressively competitive business practices, it's possible that because of their investor subsidies they've been able to undermine a number more possibly sustainable new business models around ride sharing. It's impossible to bootstrap in a market where Uber's a competitor.
You clearly have a viewpoint you're entrenched in - and you're pigeon holing this into that.
Uber is a bad investment to you - but a good investment to others. If in the end they successfully become one of the first firms to have a self-driving fleet, then they'll likely be able to make a tremendous return on their investment.
And maybe they won't, maybe they'll fold before then. But saying that this was all the fault of Fed policy is nonsense.
> If in the end they successfully become one of the first firms to have a self-driving fleet, then they'll likely be able to make a tremendous return on their investment.
Why? Everyone's building self-driving cars these days, if they have an advantage its not going to hold up for long. Then the car producers can simply do the same via their existing ride-sharing networks (car2go, DriveNow).
Largely the first mover advantage, I think. I'm sure once someone does it it'll be a (or it already is) a gold-rush, but the first to get to the finish line will realize the most gains initially.
I'm also not sure how relevant it is, but Uber has been successful in branding. It's not, "I'm going to ride share to the airport", it's usually, "I'm going to Uber to the airport."
But in the end - I have no idea :). It'll be interesting to see what happens!
Uber is not in the self-driving car business. They aren't in competition with car companies. They don't really have any competition now. I doubt that is going to change.
> There is no barrier to entry in ride sharing. Drivers can install multiple hailing apps.
Uber and Lyft have erected barriers by structuring their pay system so that drivers are much better compensated if they do a large number of rides for them. This effectively erects a barrier to entry, because newcomers cannot get drivers as easily.
You're assuming that driving cars is an ultra-tight labour market. That's not a correct assumption. There is a relatively limited number of cars you need to have good service compared to the number of people looking for unskilled jobs in major metro markets, even when unemployment is low in percentage terms. If Uber was hiring an army of specialists maybe I'd agree but loads of people can drive.
On the other hand, if a competitor offers flat-rate payments at the average price Uber pays (= lower than the drivers making the most rides get, but higher than the drivers making the least number of rides get) new drivers entering the market and drivers making few rides should flock to the competitor.
Uber's strategy will only work if those drivers, on average, are worse than the ones making many rides.
> There is no barrier to entry in ride sharing. Drivers can install multiple hailing apps. Riders can too.
This is not true. There are big network effects when you consider products like UberPOOL. A new app would burn through a lot of cash to subsidize rates below the rates Uber can offer profitably through pooling.
You are completely discounting the positive externalities that arise from "ride-sharing" (a ridiculous term) services such as Uber and Lyft. This is the opposite of misguided central planning in my opinion for a number of reasons.
According to the California DMV, after a record high number 215000 DUI arrests in 2008, the number of DUI arrests has decreased year after year. Uber and a lot of the other ride sharing apps started in about 2009. In 2013, the latest year for which I could find data on, the number of arrests had plummeted to 160000. While this information may not be all that pertinent to VC investors, it certainly has benefits for the general public. Here is a link to the data (pg5):
With the options provided by the sudden ubiquity of ride-sharing apps paired with a surge of investment in public transportation has led to some residents of Los Angeles forgoing car ownership. This is a massive shift in consciousness for a city derided for and held up as the model of urban sprawl. I've even started using a combination of biking, ride-sharing, and public transportation for commuting to work/play.
From a more personal standpoint, I can not be happier to see the death of the taxi industry. Taxi drivers would routinely give me one look and pass me by even after calling ahead because of the color of my skin. The taxi industry in Los Angeles is largely dominated by recent Armenian immigrants who most likely are not that familiar with the different cultures here in SoCal. One driver who was a bit more enlightened told me that in their taxi training class they explicitly are told to avoid picking up black passengers if possible. In fact, it got so bad, that police launched a sting and the LA city council passed new laws to target discrimination: http://www.latimes.com/local/california/la-me-lax-taxis-race...
Uber's bust this year is so spectacular because they pulled out in China because they went up against and lost to a consortium that included Alibaba, George Soros, GM, and a number of other interests who were scared shitless that if Uber won, they would dominate not only ride-sharing, but transportation in general...globally. That is Uber's ultimate aim. Yes, they lost a couple billion. But it was worth doing because if they were successful, they'd be the dominant global player. In the end, they lost to a more innovative company in Didi Xiang (I believe they were mixing dating with ridesharing among other features).
The dot-com bust was only a bust if you take a personal, myopic, short-term view. While a lot of people may have lost their shirts, that money didn't vanish into a black hole. The investment in infrastructure is responsible for the Internet as we know it today. It's not perfect, but it's pretty much at the level of a William Gibson novel. Honestly, I am hoping they turn car ownership into an expensive luxury option. I can finally enjoy driving in the California sunshine without any ill-suited and undertrained drivers on the road.
> I did it once as a prototype years ago but it was unfortunately in the pre-smartphone era and you had to find ride matches using your regular computer.
No. Back then not many people thought about mobile and besides, I'd been burned on an earlier mobile project when I'd tried to write a J2ME app (kind of what the first versions of WhatsApp were; photos with status messages but no chat).
Both driver and rider logged onto the shared website. It was more like uberPOP, the intention was people registered drives they were planning to make anyway like regular commutes and then you got a kind of fuzzy geo-specific chatroom thing where you could see other riders who were interested in sharing line up. It also calculated the distance the first driver would have to go out of their way to pick you up and did some optimisation around that, and it calculated fuel costs. The idea was to let people split the fuel bills. Back then I was worried about peak oil.
So you created a carpool forum. That's a great idea but the complexity is vastly less than a real-time platform to dispatch cars and with prices that evolve over time.
It was a real-time system, actually. It wasn't a forum: riders would appear and disappear on the fly as they entered routes, and it did overlap calculations. You just put in your start and end points and it'd match people with quite different start and end points if the trip fuzzily matched subsegments.
Weird that Lyft is still a part of this discussion since all you read about is how Uber is murdering them... and that's all we've been hearing for years and years... and yet here they are right here in this comment thread.
We'll see how strong "user preference" is when Uber can no longer afford to subsidize the living hell out of every ride, but the next little service with a strong VC backing is just getting started doing so.
Amazon has not spent years losing money, they merely chose to match spending with revenue so their numbers were balanced. That's quite different to winning market share through raw subsidies.
Key distinction. As well as assembling an incredible logistics system. Uber has... a trivial app that's already been cloned dozens of times?
Uber's saving grace, if it will ever get one, will be autonomous vehicles. First the technology has to get good enough, then the law has to catch up. All while Uber is just dumping cash to fend off the aforementioned dozens of clones by artificially deflating their prices?
Why does Uber keep keep getting called a "ride share" service? Passengers don't share the ride with other customers. The driver wasn't already going in that direction. It's just a simple transaction. I'm paying X dollars to someone to drive me to Y place. It's a cab with an app.
Uber is "ride sharing" like hiring a carpenter is "hammer sharing."
It's because "sharing" sounds really good. Everyone knows that it is kind to share, so lots of companies try to stick the word on to their own business.
I hate the way that any company with a vaguely peer-to-peer business model calls themselves 'sharing', or 'part of the sharing economy'. It's not just Uber. e.g. Zopa (a p2p loans company) describes itself as 'sharing', but it's a business where people lend money to others for a fee. AirBnB claims to be 'sharing', but at it's core, it is little more than a hotel booking system. Taskrabbit gets described as 'part of the sharing economy' but no-one is sharing anything, you are paying for workers to do chores.
Since when has sharing involved making a profit by charging users?
I had a similar thought when I saw a person working for a company called favor (https://favordelivery.com/). The dictionary definition of favor: a kind or helpful act that you do for someone.
In the mid 2000's, we were incentivized to call anything remotely possibly nanotechnology related "nano-XYZ". It lead to demonstrably better government grant success.
To be fair, AirBnB has the premise of actual sharing, like I let you use my house when I'm away or stay in my guest room that I share with other people or use for myself at other times… AirBnB is also truly peer-to-peer, at least part of the time. In practice, some of AirBnB is like a hotel, but not all.
In contrast, Uber is not like AirBnB. It sets the rates for drivers, requires certain cars, etc. If Uber really was like AirBnB overall, it'd be a different story.
As others have pointed out, both Uber and Lyft do have services where you literally share a car with another customer. These services are used by many people.
In addition, "ride sharing" also refers to the transportation itself as a shared resource, in the same way as a taxi, or even public transportation. With a system of shared transportation, not everyone needs their own vehicle which has significant financial/economic and environmental implications.
tl;dr: Uber/Lyft are shared resources among people who may or may not actually be in the car together at the same time—and the resource they are sharing is transportation ("rides").
It's because the "sharing" economy is catchier than the "capitalists extracting value from the few remaining resources owned by the middle class" economy.
That's exactly right. It's nothing more than an appeal to emotional, idealistic people--a distraction. Judging from some of the comments in this thread, it seems to be working quite well.
I don't believe the vast majority of taxi drivers own their vehicles because in most jurisdictions the cars are tied to a taxi medallion number and those are much more expensive. I.e. before Uber taxi medallions in NYC cost on the order of two to three hundred thousand dollars because of limited supply. More often than not, taxi cab owners have more than one medallion/car and rent those out to drivers. This was a great investment pre-ride sharing
Because "taxi" is very bad branding. As a test, casually ask the young Uber driver in the Prius how he likes being a taxi driver. You might get some visceral reactions. If Uber were thought of as "taxi", things would start to unravel for them.
I can't seem to find it, but IIRC Reuters(?) set a new policy to refer to it as ride-hailing and several publications followed along, for basically that reason.
> Passengers don't share the ride with other customers
I beg to differ. I just took an UberX from Changi Airport to home, a 30 minute ride during which the driver took on and dropped off a total of 3 other passengers.
Perhaps, but "sharing" would generally imply sharing with the driver not (just) the passengers -- they were going to X anyway, and shared the ride with you.
Van services for the airport have existed for a long time, in which they do multiple stops for the different passengers, and yield the same cost-savings against taxis, but no one would call that ride-sharing.
I see it differently (and have used "true" ride sharing services in Europe, like Blablacar). There is spare capacity in cars on the road, if you fill it up, regardless of the dynamics of how it happens, it's ride sharing. I might be the one sharing my taxi ride, or it could be a driver going to work. In both cases, the effect is one less car on the road for that trip. Most importantly, in the Uber Pool case the car I've just ride-shared does not then go park in the centre of town and take up valuable space, it keeps moving.
The problem with Blablacar-type apps is flexibility, unless you're doing a very common trip you'll find yourself having to be very flexible with hours and pickup and drop-off points. On the upside, it's much cheaper than alternatives especially for trip between cities.
Uber's model of having drivers basically work at as close to full capacity as possible most of the time is excellent and a great way to reduce congestion at the heart of cities, or even just the demand for parking lots.
Vans get us into the implementation, rather than the model. The model is that if there are spare seats they should be filled. The implementation is the type of car being used. I suspect that if vans were profitable for Uber Pooling they would be much more used by now, but the optimal size seems to be the family sedan or the small SUV, at least in Singapore. They might make more sense in frequent suburb -> CBD type trips where there is a lot of demand for the same trip at the same time, although in the situations where I've needed to do such a trip, there's always been frequent express buses or direct trains provided by the city (e.g. in Sydney from the North West suburbs to Darling Harbour).
Not really. The driver may or may not be going in the same direction and you are sharing their vehicle. Seems fine to me. Hammer sharing would imply one person out of two could work.
Uber's insane valuation hinges on growing from a cab service into a Dominoes competitor? A Peapod competitor? A Zipcar competitor? An Amazon competitor? All of them? It just seems so improbable that one company would capture every single market segment that falls under "Cell phone app to get things in near-real time"
It hinges on them getting public transportation agreements locked down with cities before Google or Tesla do. Imagine a major city where 80%+ of the vehicles are run by a single company and the rest are paying a toll to be on the road.
Uber doesn't appear to be any more overvalued than stocks and bonds, broadly. It may be a big gamble but so is buying $1 billion of bonds that yield .25%.
"Imagine a major city where 80%+ of the vehicles are run by a single company and the rest are paying a toll to be on the road."
Wait, what? Is that really the goal? Is that even legal? I guess the closest approximation of that is legal monopolies for companies like the telecoms and maybe utilities like electricity & gas, but I doubt if Uber et al. want to be treated like that?
But they're not your standard monopoly in the sense that they can charge anything they want. The city retains at least nominal oversight on what they charge. If it's a utility, they're subject to more scrutiny than is probably worth it. And even if we get to a point where such a monopoly exists, Uber isn't really in a position to bring much to the table that Ford/GM/Honda/whoever can't also do easily.
Uber wants to become public transportation. To become infrastructure. They want to get their hooks in before anyone esle has a chance. Their labour will organize. They'll be regulated as a utility. They'll be too big to fail. The government(s) will subsidize them.
In theory, with autonomous vehicles, public transportation will be 10x what it is today. Maybe even 100x if private vehicle ownership goes the way of the dodo.
Their Otto aquisition signals an interest in shipping. With the right kind of network effect, they could be in charge of everything that moves. You can't get to that kind of scale unless you merge with the state.
That's the plan, anyhow. We'll see how it plays out.
One needs a core advantage that's exclusive to them to become such a monopoly. In other words, not only they must win, everybody else must lose. What's the core advantage that other players won't be able to replicate?
Scale and mindshare, more data, and the ability to operate with slimmer margins, or to operate at a loss in any local market long enough to muscle out competition- which they already do.
Uber has the same kinds of advantages that Google, Amazon, Facebook and Starbucks have in their respective domains.
Existing taxi industry got upended by Lyft, which then got upended by UberX. I think the value of mindshare is overestimated, and most consumers will happily jump the ship for whatever is more convenient.
Scale is a competitive advantage in homogeneous markets. But even if you're the most efficient ride facilitator on the streets of New York, this does very little to someone looking for a ride in Des Moines or San Sebastian.
Why would rational city residents vote for such an exclusive and extremely punitive proposal? Usually firms that are vying for public monopoly status lose their flexibility, e.g. each electric rate increase has to be approved by the state regulator.
As I see it, the only acceptable outcome for Uber at this point is gaining a huge lead in the establishment of an autonomous driving fleet.
I don't see any way its current businesses (e.g. app-based taxi service, food delivery, etc.) justify its valuation. The question then is whether reliable fully-autonomous cars are 2 years out, 10 years out, or more; even the experts can't agree. Uber needs it more than Google needs it, more than Tesla, more than anybody.
Uber needs it, but so many companies began moving towards self driving cars as well. Is Uber even doing any in house research? Does Volvo need Uber?
Volvo can just license the Dominoes app and have the same technology backbone Uber has, plus cheesy bread.
Sidenote: I thought of another market segment to compete in: AirBNB! Except instead of daily rentals it'll be half-hourly rentals. Brilliant!
Ignore those pesky anti-prostitution laws. They're outdated regulations that just stifle the market. Plenty of guys named John that just need a bed for 30 minutes or less.
Or it just exposes Uber's strategy to throw money at the problem to capture the market first and solve details like legality or profitibility later. Which is kind of what you have to do when you have billions lying around and investors that expect you to multiply them.
It doesn't expose anything and mostly just whines about Uber's valuation.
If anything it underscores the challenges of disruption and the fluid nature of the on-demand services.
It may even be a case for opportunity in the space because this seems to indicate that people want it, but no one has gotten it right, yet.
I don't know if this is a conclusion or an indictment, "It’s increasingly obvious that Uber’s $69 billion valuation makes sense only in a world where it’s the only player in town—with workers who are either squeezed or replaced with robots." Either way, it's silly.
Do you realize that Uber and Lyft drivers are often making below minimum wage when you account for their costs? The only way they are getting drivers is by offering fat bonuses to both parties for driver referrals. The entire business model is unsustainable and now Uber is hemorrhaging money because all of their drivers figure this out, drive enough to get a bonus and move on.
Sure but if Uber didn't exist how would these people be making money? Why would they work for Uber if there were better options? They can choose to work wherever they want but they can't choose to work for Uber if it doesn't exist...
Honestly who is losing vs the alternative where the job to take isn't even an option?!?!
"Do you realize that most Uber drivers aren't working it as a full time job? They're working when they have downtime and can make a few bucks."
Isn't the entire point of "minimum wage" because of thinking like this? Most people working at McDonalds making minimum wage aren't doing it full time either. The minimum wage laws are trying to enforce that a person's time is worth a minimum amount, regardless of the total number of hours worked.
Not all jobs are supposed to pay all your bills and mortgage. McDonalds and similar jobs are there for students and other people who want just part-time gigs paying some additional cash for their non-crucial expenses. Such jobs are supposed to be temporary, therefore there's no point in enforcing minimum wage for them.
Thanks for the neoliberalism in a nutshell post. Go ahead, bury your head deeper up your own ass instead of dealing with the reality of the economic situation in which we all find ourselves. I got a job as a "temp" once. I was working full time second-shift in a fucking factory, doing RMA services for a major laptop and tablet manufacturer. I was doing advanced troubleshooting and repair, with no benefits or security. Capitalists are, en masse, exploiting this stupid idea that somehow, people should be paid less for the same work because of what they intend to spend their pay on?
Even if that's the case, why would someone contract themselves out for less than minimum wage, when any low-effort job would be paying more than that? The answer is that they wouldn't, and thats why Uber, Lyft, and other competitors have to pay out the bonuses to these drivers
> Even if that's the case, why would someone contract themselves out for less than minimum wage, when any low-effort job would be paying more than that?
Because other low effort jobs don't let you start and stop whenever you want? Because other low effort jobs don't take anyone with a car and clean record? Because lots of reasons.
Yeah, this is key. I've had countless drivers who were unemployed, either by choice (retirement) or circumstance. A few do try to make it a full-time job. But there's plenty who see it as a stop-gap, something to do when you have time and energy to help make ends meet, and that you can stop at any time, which is important when you're in job-interviewing mode.
Freakonomics covered Uber in one of their recent episodes and a study claimed that there was a consumer surplus, with people willing to pay 50-60% more for Uber than they were otherwise paying. Curious if it would actually play out that way if they had a monopoly AND raised prices that much.
It would work out pretty well if they had a monopoly but they won't have. Their only real barrier to entry is to be able to subsidise the hell out of their service with investor money.
1. Whether they figure out how to cut costs with driverless automation
2. If not, how many people will keep using them when fiscal discipline is inevitably imposed and prices go up.
They are in a tough spot. Without driverless cars they are a commodity service in a market with low barriers to entry. But no one has yet pulled off the type of driverless they need - no actual human in the car who needs to get paid.
As much as people seem to think "driverless cars" are obviously Uber's future, it's a pretty monumental change to their business model.
It seems that their model now is to own essentially nothing; drivers own the cars and are responsible for 100% of the upkeep/maintenance, costs of insuring, etc. If that changes, where does that leave Uber? Are they going to own the cars? If so, that's a tremendous capital investment, which is something they've specifically avoided as much as possible. If they don't, and they just remain a brand name, then it's likely that someone like Ford/GM/Toyota/whomever will eat their lunch if cars are just on-demand and self-driving. Uber offers very little in that world.
It seems to be w.r.t. self-driving cars Ford et al will just offer "Fords on demand" etc and not need Uber. The self-driving car is the hard part, not the app. Network effects are a lot less of a barrier to entry if you don't need drivers.
I think Uber has complicated what is a simple business. It connect Taxies and Riders. I have never understood Uber's insistence to build a back office around it. Why not just act as a platform and let all taxi companies, independent drives etc. use your cool shiny app ?
Uber should have been more like Yelp. Something that connects rider and drivers while letting riders know what to expect. At the moment it is like Yelp that wants to run all the places listed on their website.
Besides there is absolutely nothing Uber that might help them be a monopoly that a service like Google or Facebook is. Since they have made themselves a physical company they have exposed themselves to politics that will destroy them at least in some markets.
As someone who is extremely excited about the prospect of self driving cars, I have to say that I love the situation Uber is in.
They're flush with cash, and on a timeline to innovate. They NEED a solution, and they need it soon. An autonomous vehicle is their ticket out of this mess, and they know it
A huge subsidy is the illusion drivers have of making more per hour as they extract equity from their vehicle. After about six months the reality of vehicle costs sets in but Uber can refresh with new drivers. Stupid newbie drivers will be depleted from market in a few years.
I wonder if they just thought that when they had enough market share, they could pressure regulators into folding? That seems so shortsighted and unlikely though, I find it hard to credit the idea. I'm not sure what the alternative explanation is though.
I believe part of their positioning is to become beloved by regulators. Become part of the routine of the politically elite in Washington, and you're more likely to have favorable laws passed. Whether they're able to scale this to less-friendly jurisdictions is an open question.
That was inevitable. I don't think you can be a foreign company and become "beloved by regulators" in China.
(There are some good reasons for China to favor Chinese business, but it would be nice if they were honest and acknowledged that, instead of pretending like everything is fair when it's not.)
I remember a time when cities left and right were trying to get Uber shut down. When the question of "will Uber be able to continue to run in NYC" was actually up in the air.
Does this even happen now, anywhere in the US or Europe? Uber won the regulation fight.
Uber stopped offering UberPOP completely in Germany, now only reselling services by licensed companies through their app as UberX. I think the same is true for the Netherlands and Spain.
I am reading the book "The Sharing Platform" right now and it has a lot of discussion of Uber. I have mixed feelings about Uber's business model: as an occasional user when I travel to large cities I think that Uber provides a great service inexpensively; as a business model, I find it disturbing that heavy investment is used to temporarily keep prices low. I suppose it is common to 'buy into a market' but in Uber's and some other platform companys' cases I think it is getting to extreme.
The über economy may be disappointed to hear about the anticipated surge in home-based working and local property redevelopments to support family-friendly working ours and distances. Can't wait for über buses though.
And when there is a swift to driveless cars the business model economics is totally diferent, Uber will have to spend billions on a fleet, drivers costs will be replaced by fleet costs.
This would be a best-case scenario for them. While personnel costs will stay the same or increase fleet maintenance costs will only decrease over time as driverless tech gets cheaper. If they get to the point where their dominant cost is maintenance of an autonomous driving fleet they will have won the competition for the future of transportation which is today in its infancy.
Ride sharing is like airlines. Even thought the providers might make huge losses and little profits I think it serves a very legitimate and real need. It is here to stay. I only expect their shine to go down a bit. More opaque pricing, more penalties etc. etc.
I interviewed with them about 3 months ago for a Senior Engineer position. I aced all the design, coding and algorithm questions and then spent an hour brainstorming the ways that Uber can improve the quality of life in a city. The brainstorming question was super ambiguous, so I explored lots of different angles and kept the conversation pretty high-level. I was rejected because "We have a really high bar and we expect good problem solving at the business level". Really? You want Senior Engineers to implement business initiatives? Yeah, ok. I'll say this much, burning through a billion dollars doesn't sound like good problem solving at the business level to me.
When ever I read a post like this, I can't help but reflexively think that their interview process must be a pretty good filter. Going through your post history, I see only two years ago, you were asking:
> my app will need account creation, a map, REST requests, and notifications. what's the fastest way to get from 0 to mvp? do I need to build a native app for every platform? can I get away with a web app?
and a year later was Lead Engineer at a couple of startups
Yes, this may come as a surprise to you but some people do research before jumping into a new tech stack. And since you seem to be concerned, I ended up using Cordova/Ionic.
Right, sure. But these are pretty basic questions. Questions that you wouldn't expect a lead to be asking a few years hence. You understand that right?
I think you're assuming that informed individuals don't ask basic questions. Or maybe you're assuming that all engineers are up to speed on the latest in mobile development. Either way, you're certainly off the mark.
Actually, I go through a similar thought process when starting a new project, even if it's something I'm completely familiar with. It's a part of validating your assumptions, so you're always working with the best tools for the task.
Familiar enough to know that if he really would have aced the interview there's no way they would have dismissed him for that reason. The fact that he blatantly and hubristic claims he aced it adds to the warning signs.
While we are ignorant of your particular situation, by objective metrics, "aced the interview" is commonly defined as "they offered me a job for a salary higher than I had expected". Since they didn't offer you the job, presumably the others involved in the process did not come out of the interview thinking that you were the right person to hire.
It rings of hubristic delusion to claim that nonetheless, you "aced the interview". While hubristic delusion may in fact be the best attitude for self-advancement, depressive realists (likely in high representation on here on HN) might offer a more balanced "I thought I had aced the interview, but apparently the interviewers thought otherwise".
Uber is a bad investment. There is no barrier to entry in ride sharing. Drivers can install multiple hailing apps. Riders can too. Building a real time ridesharing engine is not hard - I did it once as a prototype years ago but it was unfortunately in the pre-smartphone era and you had to find ride matches using your regular computer.
So central banks print money in order to buy up safe investments. That forces institutional investors to pour their money into risky investments like venture capital firms. VC firms look around at a field with slim pickings but that torrent of money has to go somewhere, so it ends up being used to fight vast unsustainable price wars. And in the end people's savings that they will depend on in retirement don't end up invested in productive assets that'll yield ROI into the future .... their money ends up subsidising a 10 minute taxi ride and being lost forever.
The people who run Uber may feel that they 'have' to do this otherwise their competitors would do so instead, but that just reinforces how hopeless the situation is: they know perfectly well that their main competitive advantage is illusory, or at best, is merely a result of better access to capital flows. All it'll take is a sustained set of interest rate hikes and the end of QE, and suddenly Uber will have to charge the real underlying market rates. How will it end?