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Why I don't believe in Uber's Success

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Re: Why I don't believe in Uber's Success

#261

Post by kmonsen »

secabeen wrote: post #114
avn2109 wrote: post #68

Earlier quoted context omitted.

TFA and a lot of commenters here don't seem to understand that Uber doesn't want to compete with taxi services, which are a niche business to be disrupted en route to the real prize. It wants to compete with your car - imagine 12 lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even admit this in public. [0] The day they can get cost per mile one penny below what you'd spend owning a Toyota Ca…

I think that market is smaller than you may think. There are lots of factors that will drive people to own their own self-driving cars rather than rely exclusively on Uber/Lyft/Tesla Mobility, etc.

Cleaning is one factor I think. If you have a pet or kids you don't want to risk destroying someone elses car, but you know your own car will slowly look worse.

Re: Why I don't believe in Uber's Success

#262

Post by neumann »

rm_-rf_slash wrote: post #147
notahacker wrote: post #117

Earlier quoted context omitted.

I can believe that's their goal: I see little reason to believe they'll succeed in it, beyond making the market a bit bigger than the current taxi/minicab market. Just because they're very good at supplying an unlicensed minicab service (apparently subsidised by VC money in many areas) doesn't mean they can (i) run a minicab business at a profit so much more efficiently than every other minicab business in history th…

Can't say I speak for everyone but I mostly walk to get to places and drive when I have to. I live close enough to an ALDI to get most of my groceries by walking and I can walk to work too. Owning a car means always needing a parking space, going out to get gas, paying for insurance, inspections, etc, having to be capable of driving (because when I'm sauced on a Saturday night I really want to get greasy food, but I…

I agree - car ownership is expensive. So we get by mostly on our bikes. Reasons we still have a car:

- Moving big things - Shopping for big things - Camping - Driving out for the weekend to visit family 1.5 hours out of town - Baby in baby seat

None of these things can easily be targeted by Uber. I rarely use taxis and uber, and my friend's that do, use it as replacement for public transport and not their car.

Re: Why I don't believe in Uber's Success

#263

Post by mikeash »

pdeuchler wrote: post #190
wnevets wrote: post #127

Earlier quoted context omitted.

People seem to underestimate just how much money AWS makes.

AWS makes almost no money compared to their core business, it's around 10%, maybe a little bit more. The profit from AWS, however, is something like 50% of Amazon's total profit. That said, it's not hard to occupy a huge percentage of profits from Amazon since they purposefully run almost every other facet of the business at razor thin margins.

I always understood "make money" as referring to profit, not revenue. A business with $1 trillion in revenue and $1 trillion in expenses makes no money.

Re: Why I don't believe in Uber's Success

#265

Post by tyingq »

CoffeeDregs wrote: post #52

The commercial airline industry has lost money over the whole of its existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs). I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc. Cab companies (which I hate) and airlines saw this years ago and promoted regulations to protect their fees (and, thereby, wages). Airlines lost th…

>>The commercial airline industry has lost money over the whole of its existence...I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc

That's not exactly true. Southwest, for example, has had only a single unprofitable quarter since being a public company. They have never had an unprofitable year.

American has had stretches of bad times, leading to bankruptcy, in the past. But, more recently, are making money. $7.6 billion in profit for 2015, $4.2 billion in 2014, and so forth.

Re: Why I don't believe in Uber's Success

#266

Post by epistasis »

intrasight wrote: post #180
epistasis wrote: post #38

Earlier quoted context omitted.

The difficulty of shorting something like Uber is getting the timing right. Not only do you have to bet that Uber is over-valued, you also have to bet about the timing of when Uber runs out of starry-eyed investors to fuel the valuations. That is dependent on when it runs out of money, how quickly Uber decides to burn, and when the financials become clear enough to enough people that the public decides that the emper…

We did see the same doubters in the early days of Amazon. And we see how that turned out. Personally, I'm not confident of either success or failure with Uber. They (and their investors) are making a big gamble. In their favor is that it is a very capital-intensive gamble, and I don't see any other companies stepping forward to make that investment. A large car company could do so, but they've not made the transition…

I think the doubts about Amazon were different though. The doubt was whether they would succeed at their goal, rather than whether the goal would actually constitute financial success. Wal-mart for the digital era is clearly a successful position, and Amazon didn't subsidize their product to the degree that Uber has had to.

Re: Why I don't believe in Uber's Success

#267

Post by my_first_acct »

CoffeeDregs wrote: post #52

The commercial airline industry has lost money over the whole of its existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs). I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc. Cab companies (which I hate) and airlines saw this years ago and promoted regulations to protect their fees (and, thereby, wages). Airlines lost th…

> Airlines lost those regulations under Reagan.

Not really relevant to the main discussion, but I think it is important to make sure readers are exposed to accurate (though perhaps overly detailed) historical information.

According to [1] and [2], talk of US airline deregulation began during the Nixon administration, and picked up speed in the Ford administration. In 1975 the US Senate began pushing towards airline deregulation, under the leadership of Sen. Ted Kennedy (not the first politician who comes to mind when you think of reducing government regulation).

The Airline Deregulation Act was signed into law by Jimmy Carter in 1978, who already in 1977 had appointed a well-known proponent of deregulation, the economist Alfred E. Kahn, to head the Civil Aeronautics Board (the government agency in charge of regulating airline routes and prices).

The Civil Aeronautics Board indeed lingered on until the Reagan administration abolished it in 1985, but the 1978 Airline Deregulation Act is when it effectively lost control.

[1] https://en.wikipedia.org/wiki/Airline_Deregulation_Act

[2] https://en.wikipedia.org/wiki/Airline_deregulation#Introduct...

Re: Why I don't believe in Uber's Success

#268

Post by erispoe »

moultano wrote: post #256
erispoe wrote: post #120

Earlier quoted context omitted.

Network effects don't accumulate to a natural monopoly in this case. Yes you need a fleet large enough to get to a sweet price / waiting time optimum, but each new car in your fleet has a diminishing marginal effect. You could say exactly the same for airlines: there's network effect. Each new plane allows your to fly more rotations, have more frequent lines, open new routes... The reality is that most people take de…

That inflection point happens after you have a _lot_ of cars on the road, much more any new entrant will commit. It's equivalent to saying the power company gets diminishing returns from additional supply after they've built enough capacity to meet current demand. No one but the natural monopoly actually gets to that point.

That's a possibility. I'm not sure it's true. Both Uber and Lyft have good waiting times right now. The hypothesis that they will replace privately owned cars supposes that the market will grow immensely.

Waiting time is a function of: number of cars, size of the city, number of customers (to ignore congestion for now...) To have a good start as a new entrant, it's just a property of the size of the city. Then, you need to grow your fleet with your number of customers to keep waiting time constant. That number of cars to start with, the barrier to entry, is a tiny portion of what you need to add to keep up with demand.

If you don't have to compete with drivers, with autonomous cars, it's not that hard to meet and start a price war.

Again, I don't see how Uber will avoid being squeezed out of their margins the way airlines are. It's not cheap to start an airline, yet many people have done it. And all you need is 3 competitors to drive prices, and margins, down.

Re: Why I don't believe in Uber's Success

#269

Post by withdavidli »

Animats wrote: post #71

Here's a table of Uber's funding rounds.[1] What's keeping Uber going is Saudi Arabia's sovereign-wealth fund, which put in $3.5 billion last summer. They also took on $1.15 billion in debt last year. That's real debt at 5% interest, not some convertible deal. Bloomberg says Uber is losing $800 million per quarter.[2] Unless they can find a bigger sucker than the Kingdom of Saudi Arabia, they run out of money in 2018…

Thanks for this. Knew they took on debt but didn't know the arrangement. My biggest concern about them is if they run out of runnway. People think money chases after these deals, but there's only so many companies able to do billion dollar rounds. People that are looking for 10x returns will be looking elsewhere.

Re: Why I don't believe in Uber's Success

#270

Post by brokenmachine »

chasing wrote: post #82
avn2109 wrote: post #68

Earlier quoted context omitted.

TFA and a lot of commenters here don't seem to understand that Uber doesn't want to compete with taxi services, which are a niche business to be disrupted en route to the real prize. It wants to compete with your car - imagine 12 lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even admit this in public. [0] The day they can get cost per mile one penny below what you'd spend owning a Toyota Ca…

I believe the argument, though, is that transportation is a commodity product and, therefore, pricing is a race to the bottom. Say all cars are autonomous and on-demand. You need a car. Uber costs $20. Lyft costs $15. Who do you go with? What happens to overall pricing over time?

What I seem to never hear people mentioning is that it's nice to have your own car.

I have my car all set up how I like it, with a nice aftermarket stereo and amp and hundreds of gigabytes of mp3s because music is important to me, the seat is exactly set up how I like it, etc etc. I specifically bought a car that I actually enjoy driving.

I have an umbrella in the car in case it rains, and a jumper in there if it is cold outside, so I don't have to carry those things with me all the time.

Also, I know that there was no smelly/dirty/messy person in the car before me. Public transport is a yucky experience overall so why would a super cheap Uber end up being any different?

I will personally pay a premium for that comfort and convenience, and I can't be the only one, can I? How much cheaper can an Uber be compared to owning my own car?

I guess it all depends on how much the premium is...

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