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The Wheels Come Off Uber

nakedcapitalism.com

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Re: The Wheels Come Off Uber

#41

Post by MikeTLive »

Analemma_ wrote: post #26
clairity wrote: post #24

Earlier quoted context omitted.

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous. it's an opinion piece with a bunch of facts thrown a…

Naked Capitalism did a series of posts on Uber back in November/December of 2016 that did have a lot more facts and reasoning behind them. They probably figured their readers are already familiar with those posts and didn't want to be redundant. You should read those before blithely assuming they don't know what they're talking about.

[TL;DR] you should read before assuming

Re: The Wheels Come Off Uber

#42

Post by malandrew »

slantedview wrote: post #19
andriesm wrote: post #3

Is it just me or is this author overlaying a very strong political bias over the story of Uber?

You can hold political bias and still present a strong analysis.

You can also hold political bias and fake a "strong" analysis, especially if your audience already agrees with or desires the outcome in your conclusion.

Re: The Wheels Come Off Uber

#43

Post by ghostly_s »

TheSpiceIsLife wrote: post #37
Analemma_ wrote: post #20

Earlier quoted context omitted.

> It's a question if uber can race to self driving cars fast enough. I'm not sure that's true though; I don't get the oft-repeated logic that self-driving cars will save Uber. OK, they save on labor costs, but right one now of Uber's (slimy, IMO, but significant nonetheless) major savings is pushing vehicle maintenance and deprecation costs onto their drivers. They won't be able to do that with self-driving cars: the…

> Uber's (slimy, IMO, but significant nonetheless) major savings is pushing vehicle maintenance and deprecation costs onto their drivers. This is fallacious. The end-user pays for vehicle maintenance and depreciation. There cannot be any savings by pushing around which party writes the cheque as the only source of income to pay that cheque can be the end-user.

Oh really? So drivers are sending their maintenance bills into Uber and getting reimbursed for them?

Re: The Wheels Come Off Uber

#44

Post by sidlls »

TheSpiceIsLife wrote: post #37
Analemma_ wrote: post #20

Earlier quoted context omitted.

> It's a question if uber can race to self driving cars fast enough. I'm not sure that's true though; I don't get the oft-repeated logic that self-driving cars will save Uber. OK, they save on labor costs, but right one now of Uber's (slimy, IMO, but significant nonetheless) major savings is pushing vehicle maintenance and deprecation costs onto their drivers. They won't be able to do that with self-driving cars: the…

> Uber's (slimy, IMO, but significant nonetheless) major savings is pushing vehicle maintenance and deprecation costs onto their drivers. This is fallacious. The end-user pays for vehicle maintenance and depreciation. There cannot be any savings by pushing around which party writes the cheque as the only source of income to pay that cheque can be the end-user.

That's practically tautological, and therefore not terribly helpful in analyzing the distribution of costs across parties to the transaction.

Re: The Wheels Come Off Uber

#45

Post by sidlls »

malandrew wrote: post #42
slantedview wrote: post #19

Earlier quoted context omitted.

You can hold political bias and still present a strong analysis.

You can also hold political bias and fake a "strong" analysis, especially if your audience already agrees with or desires the outcome in your conclusion.

True. Do you have reason to suspect that's the case in this instance?

Re: The Wheels Come Off Uber

#46

Post by Animats »

cs702 wrote: post #25
clairity wrote: post #24

Earlier quoted context omitted.

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous. it's an opinion piece with a bunch of facts thrown a…

FYI, the OP links to a 10-part series of posts about Uber's economics by someone with decades of experience in the transportation industry. Here's a link to part one: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

From that series:

Uber’s real problem is that it is a staggeringly unprofitable company with fundamentally uncompetitive economics. It lost $2 billion in 2015, $3 billion in 2016, and another billion in China. It is a higher cost, less efficient producer of taxi service than traditional operators; all of its growth is explained by these multi-billion dollar subsidies as it has flooded markets with additional capacity offering unprofitably low fares.

It has none of the scale or network economies that allowed other startups to quickly grow into profitability. In its fifth year of operation Facebook had achieved 25% profit margins; in Uber’s fifth year its profit margins were negative 149%. Absolute Uber losses have continued to worsen with recent growth. Margins improved somewhat in 2016, but only because Uber unilaterally reduced driver compensation by $1 billion, leading to news reports of drivers sleeping in the cars in order to make ends meet. Uber never had any hope of profitability in a competitive market, even at its present scale.

That's Uber's big problem.

Re: The Wheels Come Off Uber

#47

Post by epistasis »

cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

HN's discussion last year on this blog's more thorough analysis of the economics:

https://news.ycombinator.com/item?id=13079023

Re: The Wheels Come Off Uber

#48

Post by ohsnapman »

MooBah wrote: post #36

Uber will live on. Just talk to the drivers - you will get it. Uber can continue churning their workforce for at least 15+ years as automation continues to whittle down the blue collar workforce.

This is incorrect. Ask anyone who has had an insider peek of any on-demand company's finances. The largest cost to all of these companies is employee acquisition, which continues to rise.

Take your own advice and do the unscientific thing of talking to the drivers. How many of them are new? How many are old? Surprising how many of those fall into the first category.

Re: The Wheels Come Off Uber

#49

Post by the_mitsuhiko »

hluska wrote: post #39
the_mitsuhiko wrote: post #33

Earlier quoted context omitted.

Yet. The goal clearly is to rush to an IPO.

Eight months ago, I would have absolutely agreed. Heck, even a few months ago when Travis Kalanick started recruting a COO, I would have agreed that the company is trying to rush to a liquidity event. Today though, I think that rushing to an IPO would be completely irrational and end with Uber trading at a small fraction of their most recent private valuation. Right now, there is a huge vacuum at the CEO/COO/CFO troi…

> Today though, I think that rushing to an IPO would be completely irrational and end with Uber trading at a small fraction of their most recent private valuation.

I tend to agree. I don't think that at this point they would try to IPO but if the numbers circulating are correct they will need cash in less than a year time and it might be tricky to raise this.

Re: The Wheels Come Off Uber

#50

Post by SilasX »

cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

> Put another way, even if Uber drives every competing taxi/limo operator out of business, as soon as the company raises prices to cover costs -- vehicle, insurance, maintenance, fuel, credit card processing, license fees, and (at least for now) labor -- new entrants (and revived old entrants) would quickly come into the market, preventing Uber from keeping prices up.

Not true -- Uber has a permanent moat, which is their steadfast, solitary willingness to be a no-tipping oasis, which others equally refuse to replicate.

Oh, wait: https://news.ycombinator.com/item?id=14596529

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