Why I don't believe in Uber's Success

I think they will start making money when they will stop fighting and figure how to do "price fixing"

The airline industry is much harder to differentiate because it is so capital intensive. Airplanes are super expensive because failure is so catastrophic -- thus they are built with multiple levels of redundancy (and production / maintenance costs increase exponentially with the complexity). Elon Musk has spoken about this exact situation in relation to SpaceX: basically NASA builds $5 billion rockets with a 1% failure rate, and SpaceX builds $30 million rockets with a 5% failure rate -- but the idea is that because SpaceX's solution is so much cheaper, they will have more launches and thus will have more failures.

Cars are much less dangerous. In a failure scenario, a car can easily be designed with a simple mechanical failsafe to disable the vehicle and wait for help. The lower cost of failure in an automobile entirely changes the business model: it allows you to apply modern product design processes (agile design, rapid feedback, tight integration of R&D and operations, etc.) because any individual failure of the product isn't going to cause headlines.

Anyway, that's the difference: a catastrophic failure in an airplane is $200-500 million in financial losses ($150-300 million for the airframe, and the bad press/settlement from killing ~200 people). A catastrophic failure in a car is the loss of a $60,000 vehicle and maybe death payouts of under $1 million. The only way we'll be able to ethically apply these design principles to flight is drones / UAVs -- which is exactly why they will quickly come to dominate air freight once someone figures out a viable model.

Anyway, due to all of this, automated taxi companies won't be taking on nearly the level of risk that an airline does. IMO there's also more room for differentiation for "specialty" taxis: let's say you and a group of coworkers need to go to another office an hour and a half away. Why not rent a "meeting" car with Internet access, whiteboards and tables so you can knock out a meeting or two on the way? Or are you hungry on the way somewhere? Order a food car and have your meal waiting for you when it picks you up. Are you tight on cash? Order a 10-passenger bus that will pick you up on the way. Because the risk and cost are lower, there will be a lot more variability in cost and thus in business model.

IMO Uber's brand value is in owning the customer billing relationship -- that is ENORMOUS in the consumer product world. They've reduced transactional friction to almost nothing (THAT is Uber's true brand value -- even if consumers don't consciously realize it), so it's going to be very hard to displace them.

So I do this for a living... and I'd estimate the value of Uber's brand at $20-30 billion right now and growing. Brand perception among mainstream consumers is extremely positive and they're aggressively expanding globally. Think about how many times you've heard someone say "Hey, who wants to call the Uber?" That's brand value right there. They are essentially price inelastic given how many tiers of service they offer.

Uber is only having a cash bonfire right now to keep the drivers happy so they don't make it a terrible experience for the customers. But rest assured as soon as they are allowed to, Uber will replace the drivers, lower the price and capture some percentage of what they used to have to pay drivers for themselves. That's when Uber goes from a brand investment to a cash cow.

Uber is basically a walking dead company. At least with this business model it just can not justify the valuation. Hence, it just can not go public and needs to continue raising more money to keep its market share.

Unit economics doesn't work—this is Uber's broken moat. In the cities where it works, there are cheaper competitors and Uber struggle to become a significant player. In my city (Kyiv, Ukraine) Uber was introduced a year ago. I used it only while it offered promotional price. Now every other local ride service is cheaper than Uber and has mobile app—sometimes even better than Uber's. Yes, Uber made these services to improve, but now they are all better that Uber in terms of prices of rides, especially in surge periods.

Uber with this model could survive only with:

1/ Autonomous cars to cut costs on drivers and

2/ Controlling the whole driverless platform in every city.

And this is not happening since to control significant portion of driverless cars one need to control the whole driverless tech stack. It will be pretty hard to aggregate in one service different co's driverless tech with different specifics. That's what Tesla does.

I guess later when driverless will become growing en mass, Tesla will start own ride service, and letting own car for the a ride service will be opportunity to reimburse car purchase. It is then that Tesla will start licensing driverless tech to other manufacturers, including sensors configuration and centralised trained AI cloud with driving skills on different roads, and give opportunity to join Tesla's own ride on demand network. It will be a car selling point: "buy a car with Tesla driverless tech and let it for rides via Tesla's network to cover payments for your car".

So, it's rather hard for Uber to use advantages of driverless unless Uber builds own full stack and is the first on the roads with it + starts licensing it to car manufacturers for their cars to join Uber network.