111–120 of 141 posts
There has never been an above razor thin profit line for fleet vehicle operations. Uber is a subsidized taxi company. They charge people from A TO B and take a cut of the fare. The fares are so low compared to taxis because of this subsidization. The only way they survive as this app form of a taxi is by drastically raising fares. They will be too far behind the driverless car race and crash there as well. Let alone…
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The naivety on HN is staggering sometimes. Imagine your parents give you a $10 loan to start a lemonade stand. You think you need six years to make them an above market return on their investment of 2x. You're gonna buy cups, lemons, sugar, and water. In the first year you think you're going to spend $3 and make $0. So you have $7 in the bank. In the second year you think you're gonna spend $2, and make $1. So you ha…
> The naivety on HN is staggering sometimes. This is pretty arrogant given that you're trying to prognosticate something that historically isn't predictable, the financial outcome of a company. What you neglect to acknowledge in your post is that the there is a lot of signaling from Travis about his ethics being questionable, existing investors want to get their money out so there's no assurances they're being ethica…
In my view it's less arrogant than OP is being naive. My point is not that Uber is going to have a certain financial outcome, it's that people are losing their minds because it's large numbers. Losing $3bn on $6bn of revenue is "unhealthy" but if they were losing $3m on $6m people wouldn't give a shit.
> there is a lot of signaling from Travis about his ethics being questionable
Yes.
> existing investors want to get their money out
The Kapors are seed investors. I don't think any of the institutions who have put in the bulk of the $15bn raised have suggested that they want their money back.
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> Autonomous cars are not going arrive for 10 to 15 years. Tesla believes its cars are already equipped with the necessary hardware and that the software, including Tesla Network (their announced autonomous Uber competitor), will be going live at the end of 2017. At this point five years seems like a long time horizon for autonomous cars being on the road.
Saying they're going to release details at the end of this year is not the same as launching at the end of the year.
OP said that self driving cars are 10-15 years away.
I observe that the hardware has already been developed and that Tesla anticipates its software being ready within the next 12 months, suggesting that a ten year horizon feels conservative.
HN pedant wades in to make an irrelevant point.
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> Autonomous cars being generally available lowers the barrier to entry for competitors to Uber, and makes their position worse, not better. Why do you think that's true? Uber is investing heavily in autonomous cars because they want to be very early to the market (hence "Uber's bet is autonomous cars"), and because when you have autonomous cars high utilisation is important, they are in food delivery, and interested…
>> Uber's bet is Uber controlling the autonomous car market > I think most reasonable people would be able to impute some sort of first mover or early mover advantage into what I was saying. I think most reasonable people are deeply sceptical that Uber is going to win first-mover advantage against the likes of Google (who's been working on the autonomy tech for what, a decade, now?), traditional automakers (who have…
Sure. Not anything to do with my point, though.
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> Uber is demonstrating that they can sell $2 bills for a buck and that there's demand for that. I think the consensus is that rides are subsidised by around twenty cents on the dollar. Ubers bet is autonomous cars. They pay a 75% fee to the driver. When autonomous fleets launch in the next few years they'll normalise prices at around 50%, meaning your $10 ride costs you $5, and each ride has wafer thin profitability…
> Ubers bet is autonomous cars. Out of the following contenders: 1) GM (+Cruise Automation), Mercedes or VW with their enormous supply networks, vendor lock-ins, economies of scale and ability to massively ramp up a car production when needed. 2) Tesla with their (allegedly unique) battery storage tech, working manufacturing facility and massive amounts of data harvested from thousands of Tesla vehicles on the roads…
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The naivety on HN is staggering sometimes. Imagine your parents give you a $10 loan to start a lemonade stand. You think you need six years to make them an above market return on their investment of 2x. You're gonna buy cups, lemons, sugar, and water. In the first year you think you're going to spend $3 and make $0. So you have $7 in the bank. In the second year you think you're gonna spend $2, and make $1. So you ha…
The naiveté on HN is staggering sometimes. Imagine your parents give you a 10 dollar loan to start a lemonade stand. It costs you $3 to buy the lemons, sugar, water, and cups to make 10 cups of lemonade, that you sell for ten cents each. In the first day you spend $3 and make $1. In the second day you spend 3 more dollars and make one dollar. In the third day you spend $3 and make another $1. In the fourth day you ag…
I was demonstrating to OP that even if he is concerned by the losses Uber is making, and doesn't consider $3bn of losses on $6bn of revenue to be "healthy", it doesn't matter if the plan and the numbers are headed in the right way as far as investors are concerned.
> On the fifth day a miracle happens and your mom gives you another 10 dollars
This is precisely my point. This does not happen (except at huge economic cost to the company and its founders) unless you are demonstrating a plan which you are executing on.
> Uber doesn't have a business model.
Yes, it does. You may not like it, and you may think it's stupid and you know better than the people who put $15bn into it, but it does have a business model.
> They can't make money continuing to operate the way they do now, fares don't cover their operating costs, even if you factor out costs of "building" or "expansion".
Really? A 15% price increase = Uber is profitable[1], and you don't think they could generate a commensurate margin shift from losing central cost? Get rid of the team working on driverless and it's a profitable business.
> Their paths to success are either forcing everyone out of business by undercutting them
Yep.
> somehow managing to get self-driving taxis on the market
Yep
> or simply continuing to build huge volume, as they have been, and then cutting their central costs back to achieve profitability
Oh, you didn't suggest that much easier path to profitability which they could execute on tomorrow. Weird.
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And when they need to make profit they can easily fire about 90% of their workforce & keep the machine humming in place.
can they? Their valuation is entirely based on self-driving cars, if they fire everybody and give up on that it's over for them.
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> The naivety on HN is staggering sometimes. This is pretty arrogant given that you're trying to prognosticate something that historically isn't predictable, the financial outcome of a company. What you neglect to acknowledge in your post is that the there is a lot of signaling from Travis about his ethics being questionable, existing investors want to get their money out so there's no assurances they're being ethica…
> This is pretty arrogant given that you're trying to prognosticate something that historically isn't predictable, the financial outcome of a company. In my view it's less arrogant than OP is being naive. My point is not that Uber is going to have a certain financial outcome, it's that people are losing their minds because it's large numbers. Losing $3bn on $6bn of revenue is "unhealthy" but if they were losing $3m o…
(a) your beliefs that Uber's fleet shifts to driverless at various points over the next 20 years.
(b) Their change in costs and revenues following this scenario (and in cases when this doesn't happen).
I can only justify Uber's recent valuations if I entirely discount regulatory risk, assume huge GDP growth in the developing economies + Uber establishing dominance there and that Uber goes completely driverless in the next 10 years, without any legal/licencing costs.
The alternative would be a 30% fare hike, which would cause customers to go banannas.
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> inability to win market share from established players in Russia, India or Malaysia Any concrete data on this other than for news articles?
A good amount of companies operating in the space are private, guarding their financials as much as possible, so the field is not well covered by analysts, especially in emerging markets. I guess there's not enough incentive for an analyst, investment bank or brokerage house to pay for such research until someone in the field goes public. So unfortunately, we're restricted to random news articles. Here's NYT on India…
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> This is pretty arrogant given that you're trying to prognosticate something that historically isn't predictable, the financial outcome of a company. In my view it's less arrogant than OP is being naive. My point is not that Uber is going to have a certain financial outcome, it's that people are losing their minds because it's large numbers. Losing $3bn on $6bn of revenue is "unhealthy" but if they were losing $3m o…
Can you articulate: (a) your beliefs that Uber's fleet shifts to driverless at various points over the next 20 years. (b) Their change in costs and revenues following this scenario (and in cases when this doesn't happen). I can only justify Uber's recent valuations if I entirely discount regulatory risk, assume huge GDP growth in the developing economies + Uber establishing dominance there and that Uber goes complete…
My point as ever remains this: people are looking at Uber's current model (where it loses 15% on each fare), its revenue, and its losses, and shitting themselves. They are correctly observing that to raise fares they would have to suffer a loss of customers. Those people are missing several points:
1. The bet on autonomous cars reducing Uber's fares further whilst simultaneously driving them to profitability
2. Uber's intent to spread beyond just passenger carrying
3. The fact that Uber could cut its expensive R&D and autonomous car team today and likely be profitable.
4. The fact that these numbers are simply the same numbers as most/many/all startups raising venture capital, simply orders of magnitude higher. They raised $15bn at a $100bn valuation? Great. There are companies who have raised $15m at $100m.
> I can only justify Uber's recent valuations if I entirely discount regulatory risk, assume huge GDP growth in the developing economies + Uber establishing dominance there and that Uber goes completely driverless in the next 10 years, without any legal/licencing costs.
A more interesting discussion (although irrelevant to my argument), and one we'd struggle to make without, y'know, actually having the data we need to value the business. Which is to say that we're sitting on the sidelines trying to guess the strategy and numbers. Parts of it are clear but I'd expect that a VC investor in Uber probably knows a bit more about what they want to do than us.