The endgame is a monopoly, at which point they raise prices to the monopolist profit maximising level and extract those sweet sweet rents from consumers:
https://en.wikipedia.org/wiki/Predatory_pricingThis practice is illegal in many countries. Legalities and ethics aside (it's easier to discuss this in 'value neutral' terms), the strategy only works if you've got a bigger bankroll than your competitors (i.e. they go bankrupt before you do). By the sounds of it, Uber have a pretty big bankroll thanks to VC funding?
[Value Free Zone]
Also, they're going about it in a fairly clever way. It's almost like a market version of the 'blitzkrieg' strategy. By progressively moving through one localised market to the next, it's essentially Uber's bankroll vs. whatever the largest local market incumbent can muster. In addition, they're ignoring regulations because it further lowers their costs.
And here's the blitzkrieg part: when they encounter a market (e.g. Austin) with particularly strong regulators or incumbents with larger than usual bankrolls, they bypass it (for the moment), just as the Nazi's did if they encountered heavily fortified positions on the Maginot line. They'll just bypass and move on to softer targets.
I imagine once those are monopolised, and they've replenished their bankroll by charging monopoly prices where they can, they'll come back for the more 'fortified markets'. Except this time they'll:
- Have a bigger bank roll
- Have a constant stream of cash rolling in from their monopolised markets
- Possibly have a more favourable regulatory environment due to 'lobbying' (i.e. political 'donations')
Given the position they will be in by the time they swing back to the 'holdouts', they may not even see the need to flaunt local regulations to crush their competition.
[/Value Free Zone]
Personally, and assuming I'm right, it's pretty despicable behaviour. It's not innovative; it's illegal. And it's not 'disruptive' either; it's destructive and exploitative. I wouldn't deny these guys are smart, but so were most 'robber-barons' throughout US history. If 'hacker culture' is synonymous with 'destroy all who might oppose us, then turn around and screw consumers', then yeah, they're hackers (and I most certainly am not).
But if SV gives a fig about its reputation, and believes that hackers can 'break the rules' while maintaining some shred of personal integrity, then I wouldn't be so keen to hitch my wagon to the likes of Uber.
Note: I have no stake in this one way or the other. Frankly, I'm not a big fan of the traditional taxi industry in my country; they're essentially a government protected oligopoly and a bunch of rent-seekers to boot. Just calling it like I see it.