
Can you short Uber? - uptown
http://qz.com/707947/investors-have-placed-a-one-way-bet-on-uber-which-made-us-want-to-figure-out-a-way-to-short-it/
======
legulere
> if all or most of its cars are propelled by robots, and it will simply be
> paying to insure and maintain them—its profit should be astronomical.

No, then Uber will have to lower prices to stay competitive against
competition that exactly like uber will be in the same situation.

~~~
fennecfoxen
Well, assuming that its competition has made it that far. If Uber is years
ahead of everyone and has the volume it could expand like crazy and crush
future competition on the economies of scale alone.

if.

~~~
PinguTS
While there are other companies like ZipCar or Car2Go have already the
technology, the experience, and the infrastructure on how to own cars, how to
service cars, and how to bring the users and those cars together.

On the other side, Uber does not own any car neither have any infrastructure
for those cars.

So it should be easier for ZipCar, Car2Go and alike to exchange those cars
with self-driving cars vs. Uber to build up that infrastructure.

------
voiper1
One of the trends propelling Uber is that of self-driving cars.

HOWEVER: What's stopping the car companies from simply running it themselves
and cutting out uber as the middleman? Tesla already announced they plan to
facilitate ride sharing. ([https://www.tesla.com/blog/master-plan-part-
deux](https://www.tesla.com/blog/master-plan-part-deux))

~~~
RickS
>HOWEVER: What's stopping the car companies from simply running it themselves
and cutting out uber as the middleman?

Ignoring tesla for a minute:

1) Engineering prowess. User-facing software in cars is notoriously poor, and
the idea that the same people that greenlit the nissan cube can deploy and
scale an uber rival seems generous to say the least.

2) Exclusivity/overcrowdedness. Uber and lyft don't have strong opinions about
brand of car (though the prius is the default, and they care about newness).
This is likely not true of more traditional car companies. This leads to one
of two scenarios: in the first, companies try to limit their ride hailing to
on-brand cars, meaning you can only hail fords with ford-uber, etc, requiring
that users have multiple apps and pit them against each other. This seems
silly. In the second, they allow others brands to be hailed as well, and then
you've got mostly identical ride hailing apps, each from a different car
company, and the car companies are now competing on experiential nuances that
aren't even centered around their vehicle offerings. That's nutty too.

This wasn't my thought going in, but having written all that, tesla seems like
a much better buy all of the sudden, because it's the only player that feels
like it has the software skills to solve 1, and the apple-esque brand clout to
solve 2.

~~~
PinguTS
You seem to ignore that those car companies have such services already in
place and run them successfully. Car2Go from Mercedes was first and started
with the Smart. It is now being supplemented by higher-end models.

BMW has the same service running together with SIXT in Europe with BMW Mini
and other smaller models.

Also VW started the same just a few years ago, but is not widely used, AFAIK.

~~~
__derek__
BMW also recently launched ReachNow[1] in Seattle, which lets users rent BMWs
and Minis.

[1]: [http://reachnow.com/](http://reachnow.com/)

------
finstell
I like Uber. I use it from time to time. I use it less frequently nowadays
because the government here blocked UberPop. I enjoy using it as much as I
hate using taxis. I particularly enjoy it because I can rely on Uber when I
travel abroad when I am most vulnerable to taxi scams.

Having said that, I am one of those who does not get this type of ultra high
valuations. That's another topic of course, I am not going to claim anything
as I am not an expert.

The thing is if yet another company pops up, maybe a local one, with similar
offerings as Uber, I might as well start using their service. It's so easy to
switch or use them both, I don't have a emotional connection to Uber, why
should I? I'd always use whatever works for me. So, I see Uber is not
something irreplaceable. The most valuable thing is the idea itself, car
sharing etc. It's not like building up a search engine, with secretive ranking
algorithms that works better among competitors. Of course, what Uber had been
doing is phenomenal, they probably do a lot of things behind the scenes. Uber
had more capital and did more. The others will catch up. Which is a good
thing, I'd rather have multiple service offerings, it's good for consumers.

To me, Uber is a ice breaker ship. Started exploring in the frozen seas.
Opening up new paths. That's expensive. They have to do a lot of things right.
It's difficult. They are ambitious. I am excited that new paths appear in the
frozen seas that I can benefit eventually. On the other hand, what I see is,
once the paths are open, others can follow easily. They don't need tank-like
ships to overcome the icebergs, they don't need the best captains and crews,
they don't need the most of the crucial stuff Uber needed. They will just sail
along the paths Uber opened.

------
dimino
After reading the very long article (it's extremely detailed, I recommend it,
but only if you _highly_ value business strategy), I'll save everyone the
trouble:

No. You can't, currently.

~~~
dawhizkid
TL;dr Buy taxi medalllions

~~~
Endy
I don't ride private transit in NYC without seeing a medallion first.

------
yladiz
I think there are a lot of interesting points to the article. It's currently
not possible to short Uber directly, but you could go through a derivatives
broker, or you could short a company indirectly, like Xchange, or buy stocks
in a company that would profit if Uber collapsed. I think that while you can't
directly short Uber, you can get creative... and I'm sure that with the number
of people that want to short Uber, and if it did a down round that would be
even higher, that there will be some possibility of shorting Uber directly
before IPO.

I'm curious why Uber isn't on any of those private exchanges. Is Uber worried
it would be shorted if it were?

~~~
ryporter
Private companies often want to control who and how many of their shareholders
are. It is likely not because they fear being shorted. The market for short
selling private companies is currently a very distant threat.

Let's say you place a short bet on Uber through one these "creative" methods
that uses a smaller exchange, then you have to worry not just about Uber's
price rising, but also that you will not be able to unwind the trade should it
become profitable. Doing so could prove to be impossible either for legal
reasons (e.g., if Uber or some other company launches lawsuits as their price
drops), or if the exchange simply goes belly up. In short, you better be very,
very sure that Uber's price will drop substantially in order to make sure a
risky bet.

------
nl
What is Uber isn't a car/personal transport company at all?

As has been pointed out numerous times, network effects don't really have the
same power in the "taxi competitor" market as they do in - say - social
networking.

But there is a business where network effects are potentially at least as
powerful as social networking, where market leadership is divided between
multiple ~$40B companies and where there is proven huge potential for market
disruption.

It's a market where software powered efficiencies can make a huge difference,
where automation can increase margins and improve service and where the
company having the most drivers (or automated devices) in each city has a huge
advantage. What's more, it is one of the few markets where international
expansion gives critical network effects beyond what is possible in the US
market alone.

Finally, Uber is already aggressively moving into this market, and yet no one
seems to talk about it - I guess it just isn't as sexy as cars.

As they say: _amateurs talk tactics, professionals study logistics_.

In this article's defence, it does at least mention this. But I think the
potential here is _huge_. Think of Uber as an Amazon competitor, taking
responsibility for everything after the production of a product.

~~~
adwn
> _Finally, Uber is already aggressively moving into this market, and yet no
> one seems to talk about it - I guess it just isn 't as sexy as cars._

No, it's because right now, they're not a logistics company, they're a taxi
company. All they do is match supply and demand in a very localized setting,
which is a far cry from the likes of DHL or FedEx.

Uber is not exactly printing money [1], so I have no idea why you assume that
they'll have an edge in the transition to a very different business model?

[1] In fact, their only moat seems to be their brand name, and the expensive
legal and lobbying battles they fight profit their competitors just a much.

~~~
jasode
_> , so I have no idea why you assume that they'll have an edge in the
transition to a very different business model?_

Like gp, I also think Uber is pursuing the more ambitious goal of _generalized
logistics_ rather than just replacing taxis in cities. I have no insider
knowledge of this so I just base it on factors such as the number of
developers exceeding 1200[1]. It doesn't seem like you need 1200 programmers
just to dispatch taxi rides via mobile phones.

My wild guess is that they want to turn the mass of drivers out on the streets
into a massive "packet switched network" or "mesh network" of transportation.
Instead of transporting just people, imagine you could move _packages
/groceries/deliveries_ from one car to the next. The drivers don't even have
to make the complete trip from point A to point B. The drivers could hand off
packages to the next driver using the mobile phones' cameras as builtin
"barcode scanners" to track progress within the network. The so-called "Uber
logistics network" would be innovative in the sense that they don't require
"hubs" like UPS/Fedex. An Uber driver could simultaneously take a passenger to
the airport while there's a package in the trunk for delivery to a business
that's next to that airport. Today, we have a lot of cars wasting gas on
"single purpose" trips. A multi-purpose utilization of the cars already on the
road via "smart logistics" could offer cheap same-day deliveries while
_reducing_ gas consumption by society. This type of network coordination would
require crazy mathematics and algorithms in graphs and combinatorial
optimization.

Like I said, it's just speculation but the above scenario seems more immediate
than the arrival self-driving cars. The "Uber network" is actually
complementary to the future of self-driving vehicles. They could first deploy
the network of "package delivery" to human drivers and in 15 to 20 years, it
is then 100% driven by robots. The underlying graph algorithms stay the same.

If Uber isn't the company working on that, then I'm not sure who else is
pursuing it. If other companies like Lyft/Amazon/Fedex/UPS are looking into
crowdsourced logistics, they are really doing an amazing job of keeping their
"skunkworks projects" a secret.

[1][http://www.businessinsider.com/the-power-players-of-
uber-201...](http://www.businessinsider.com/the-power-players-of-
uber-2016-1?op=0#/#thuan-pham-makes-sure-the-uber-app-stays-up-and-running-3)

~~~
sokoloff
I can see this maybe making sense for food deliveries, but I don't see the
economics working for parcel deliveries. A UPS truck probably costs under
$4/mile (including the driver) and carries hundreds of packages. An Uber
costing only $0.54/mile (GSA rate) and carrying 1 package is ~20x as expensive
on a package-mile basis (and that's not leaving anything for the driver).

Uber will need to either dramatically increase the packages per car or (more
likely) Uber delivery will be confined to very time-sensitive packages (food
delivery and maybe competing in the bike courier space).

~~~
jasode
_> Uber delivery will be confined to very time-sensitive packages (food
delivery and maybe competing in the bike courier space)._

Yes, it seems like the most obvious pricing advantage would be same-day
deliveries.

To send a 5 pound package from my address to another address in the adjacent
zipcode (~10 miles), the transit time is 1 day and costs $9.85. For that
price, I also have to get in the car myself and drive my package to a retail
store and drop it off.

If I arrange for UPS driver to come to my house to pick it up, the price
shoots up to $19.55!

Let's say my house is point "C" and my ship address is point "D". If the Uber
servers can determine that point "C" is a very minor detour for an Uber driver
going from point "A" to point "B" ... then he can cheaply pick up my package
and drop it off at point "D" with minimal increase in gas costs. Uber could
charge way less than $19 while the driver gets a revenue boost. The UPS "hub"
model doesn't make that type of dynamic rerouting cost effective.

------
kbob
> For the major carmakers, [car sharing] could mean catastrophe.

I don't see this. A car currently lasts for 100,000-150,000 miles. Typically,
several different owners use it for 10-15 years before it's worn out. If a car
is 80% utilized, it will rack up the mileage much faster, and the owner
(whether you, Uber, or Ford) will have to buy a new one in a year or two.

Maybe the fleet market will start demanding longer-lasting cars. If so,
manufacturers will have reason to charge more. Or maybe cars will move to a
two-year obsolescence cycle like phones. In any case, the amount we spend on
cars will roughly track how far we travel.

> Starting as soon as a decade and a half from now, large numbers of people
> around the world will get around by hailing driverless taxis that operate
> like robots, so ubiquitous that they will arrive an average of a minute
> after being summoned by an app.

I only partly see this. People who live in city centers already hail taxis.
Uber may well displace the taxi industry, but they aren't growing the market
(ignoring future takeout delivery plans). Outside the densest cities, it's
still not clear that fleet cars make sense unless the price seriously
undercuts the status quo (the notorious 10X improvement).

------
amelius
I really don't get Uber's business model. It seems to me that the whole
company is just based around the brand. Anybody could start an Uber clone
tomorrow. There is totally no lock-in potential (except they could claim
exclusivity for their drivers, but I think this is limited). This means that
any large party with sufficient marketing budget could just push Uber away.

~~~
fennecfoxen
Uber's primary barrier to entry is a network effect - if more cars are on Uber
that means more word of mouth for Uber less people interested in the other app
which means less drivers interested in the other app. They reinforce this not
by pure exclusivity deals but by paying drivers who drive more on Uber higher
rates (which is a tactic I've seen in the stock photo industry as well, which
is also reliant on a marketplace model where a big player brokers access to
lots of individual contributors.)

Its secondary barrier is that getting quality software right is more expensive
and harder than it looks and benefits from economies of scale. (I don't trust
Uber further than I can throw my cell phone but the app is far slicker than
Lyft or Karhoo or whatever.)

That's not insurmountable but it's nothing either.

~~~
amelius
Interesting.

> more word of mouth for Uber less people interested in the other app

This is branding, which I mentioned. Or am I missing something?

> Its secondary barrier is that getting quality software right is more
> expensive and harder than it looks and benefits from economies of scale.

I'm not sure this is true. The software of Uber does not need to scale larger
than, say, the size (in users) of a city. Phrased differently, a city is a
natural sharding point. Of course, there is software that needs to use the
full dataset (for statistics etc.), but this software can run in batch mode.

~~~
fennecfoxen
> A city is a natural sharding point.

No no, wrong type of scale. I'm talking _economies_ of scale.

Uber needs to pay N SFBay-area engineers upwards of $200,000 USD/yr (including
health expenses, employer-side taxes, and other overhead) for N years in order
to build a well-functioning, city-scale software ecosystem - including server
software, devops and maintenance tools, payment provider integration,
antifraud efforts around payments, client software on multiple app stores,
internal tools for the support team, business tools for the traveling
consultants who want easier expense report receipts, all sorts of fun data
collection for the business analysts, and all the ongoing maintenance and
operations costs associated with that mountain of code. With all that effort
expended, all those millions spent, they have a bunch of software they can
deploy to one, single city and do a top-notch bang-up job of it.

But now this $N million piece of software can be deployed to its second and
third and three-thousandth locality with little more than extra computers,
some clever sharding work, and maybe some localization: a puny fraction of the
original development effort.

If they need a whole new _country_ , throw in some more
internationalization/localization and maybe a new payment provider
integration.

 _Those_ are the economies of scale. Every feature that Uber adds for $N in
developer time is hundreds of times more impactful than if Single City
Carshare [tm] were to add it, even if they can use cheaper developers outside
the Bay Area.

Of course, there are diseconomies too (if only because of managing additional
headcount on the per-city operations side of things), but as you said, cities
are a natural sharding point, and this keeps those diseconomies down.

~~~
amelius
Then perhaps I am the only one here who is not convinced of the complexity of
Uber's software. Basically, it is just a CRUD application, with some realtime
features to make it look a little more sexy. Yes, software like that could
cost on the order of millions, but there are lots of companies/investors who
could cough up this kind of money without even blinking. I just don't
understand Uber's huge valuation. They seem to have no secured business
position, other than by branding (and perhaps a little by binding their
"employees").

~~~
fennecfoxen
Oh no, this isn't to justify the valuation by a long shot.

------
bjornsing
TL;DR: No, you can't.

------
reitzensteinm
I read the article and couldn't find anything about liquidation preferences.
I'm going to go out and a limb here.

If you think that if you could short Uber, you could do so at a $62.5 billion
valuation, you should stay away from making those kinds of risky financial
plays.

------
nipponese
That was a long piece simply to suggest someone is creating swaps against the
valuation.

------
kakakiki
self-driving cars are a no-no in indian roads! the chaos is and will be beyond
AI that we will get to see in the near future.

reference : me (an indian)

~~~
fdsaaf
India needs to get its act together with traffic. I'm heartened that there are
anti-honking groups already --- that's a big start. The first step in fixing
driving in India is changing the honking culture. Seriously.

Efficient transit is just table stakes for being a serious economic power.
Indians are smart. They'll figure out how to fix things.

