
Why I don't believe in Uber's Success - Ben-G
http://blog.benjamin-encz.de/post/why-i-dont-believe-in-ubers-success/
======
CoffeeDregs
The commercial airline industry has lost money over the whole of its
existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier
(with a slight nod to Frequent Flyer programs).

I'm not sure how Uber, Lyft, etc are any different than Southwest, American,
etc. Cab companies (which I hate) and airlines saw this years ago and promoted
regulations to protect their fees (and, thereby, wages). Airlines lost those
regulations under Reagan.

To wit, I had dinner with a few friends in SF and it was raining when we left:
"I'll call an Uber and we can share. ewww... 250% surge pricing or $90. Lemme
check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes."
There was _zero_ friction switching from Uber to Lyft.

Winning in this market seems to require a Level 4+ autonomous car [1]
__monopoly __. Level 4+ autonomous cars are not going to be here anytime soon
and Uber 's not going to have a monopoly. So it's going to continue to be a
gnarly pricewar, made worse by Level 3 (in which the "driver"/pilot is a
student doing his homework for $5/hour, taking over driving once or twice per
hour).

Not sure I agree so much with the body of TFA but I certainly agree with its
conclusion.

[1] [http://www.techrepublic.com/article/autonomous-driving-
level...](http://www.techrepublic.com/article/autonomous-driving-
levels-0-to-5-understanding-the-differences/)

~~~
avn2109
TFA and a lot of commenters here don't seem to understand that Uber doesn't
want to compete with taxi services, which are a niche business to be disrupted
en route to the real prize. It wants to compete with _your car_ \- imagine 12
lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even
admit this in public. [0]

The day they can get cost per mile one penny below what you'd spend owning a
Toyota Camry, they'll open up the biggest transport market ever created (the
intentionally-inefficient American built environment). They're taking all this
VC money and expanding so aggressively not because they like the scale, but
rather because _that 's the only way to compete with private car ownership._

[0]
[https://twitter.com/travisk/status/564065776005808128](https://twitter.com/travisk/status/564065776005808128)

~~~
notahacker
I can believe that's their goal: I see little reason to believe they'll
succeed in it, beyond making the market a bit bigger than the current
taxi/minicab market.

Just because they're very good at supplying an unlicensed minicab service
(apparently subsidised by VC money in many areas) doesn't mean they can (i)
run a minicab business at a profit so much more efficiently than every other
minicab business in history that the average American decides they can sell
off their four-wheeled status symbol and commute in a surge-priced Uber or
(ii) compete with the manufacturers in supplying self driving cars on demand,
whilst likely operating at a huge disadvantage in vehicle acquisition and
maintenance costs

~~~
rm_-rf_slash
Can't say I speak for everyone but I mostly walk to get to places and drive
when I have to. I live close enough to an ALDI to get most of my groceries by
walking and I can walk to work too.

Owning a car means always needing a parking space, going out to get gas,
paying for insurance, inspections, etc, having to be capable of driving
(because when I'm sauced on a Saturday night I _really_ want to get greasy
food, but I can't drive soooo...).

If an autonomous car-share program cost about as much as the car payments and
gas _alone_ for the the amount we would use it, we would sell our car in a
heartbeat. A car isn't much of a status symbol when most of your friends can't
afford a nice one either. Kinda makes you look like a dick, in comparison.

~~~
majormajor
> A car isn't much of a status symbol when most of your friends can't afford a
> nice one either. Kinda makes you look like a dick, in comparison.

Isn't that exactly what makes it a status symbol? Keeping up with the Joneses,
and all -- it's one thing to not play the game, but that doesn't mean a lot of
people don't, and this seems to just be _agreeing_ with what makes it a status
symbol.

Most American cities are sufficiently un-dense that things like "always having
to look for parking" aren't big deals. Laws ensure places have enough spaces
(these policies are very pedestrian-unfriendly, but such places are more car-
friendly than the dense coastal cities). Traffic is slower at rush hour but a
non-issue any other time in these places.

The average car these days lasts 10+ years. Perpetually renting cars is going
to be seen as disadvantage for a lot of people who take out ~5 year loans and
then can keep the cars for quite a while after finishing off their payments.
Anecdotally I'd wager that people buy new cars more for the status, or for the
change of having something new, than to replace something that just doesn't
work anymore, nowdays.

~~~
zeveb
> > A car isn't much of a status symbol when most of your friends can't afford
> a nice one either. Kinda makes you look like a dick, in comparison.

> Isn't that exactly what makes it a status symbol?

To be an effective status symbol, something has to be of higher status, but
not _too_ high a status. Gold chains are just gauche, despite how valuable
they are. So too, once upon a time, having a cell phone.

~~~
Godel_unicode
I think the tricky part there is social context. There are social groups where
gold chains are absolutely status symbols. You'd be hard-pressed to find an
NFL receiver without one, for instance.

Conversely, there are groups where being able to afford _not_ to own a car is
a status symbol. Think "I live in a neighborhood where everything is
walkable", or "I just throw money at Uber because it's easier and I can afford
it".

Anything is a potential status symbol, if a group subconsciously agrees that
it is. If your group doesn't value humility then too-high-status isn't really
a thing.

------
bsirkia
Definitely worth reading the Naked Capitalism series he mentions in a
footnote:

Part 1: [http://www.nakedcapitalism.com/2016/11/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-
one-understanding-ubers-bleak-operating-economics.html)

Part 2: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
two-understanding-ubers-uncompetitive-costs.html)

Part 3: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
three-understanding-false-claims-about-ubers-innovation-and-competitive-
advantages.html)

Part 4: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
four-understanding-that-unregulated-monopoly-was-always-ubers-central-
objective.html)

Part 5: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
five-addressing-reader-comments-and-questions.html)

Part 6: [http://www.nakedcapitalism.com/2017/01/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-
six-bleak-pl-performance-while-stephen-levitt-makes-indefensible-claims.html)

~~~
habosa
Can't upvote this enough. It's a rigorous analysis showing that Uber is
running a VC-funded ponzi-scheme in their current iteration.

It is possible that some future Uber innovation will make them profitable, but
their current operation is smoke and mirrors.

------
Animats
Here's a table of Uber's funding rounds.[1] What's keeping Uber going is Saudi
Arabia's sovereign-wealth fund, which put in $3.5 billion last summer. They
also took on $1.15 billion in debt last year. That's real debt at 5% interest,
not some convertible deal.

Bloomberg says Uber is losing $800 million per quarter.[2] Unless they can
find a bigger sucker than the Kingdom of Saudi Arabia, they run out of money
in 2018.

[1] [https://www.crunchbase.com/organization/uber/funding-
rounds](https://www.crunchbase.com/organization/uber/funding-rounds) [2]
[https://www.bloomberg.com/news/articles/2016-12-20/uber-s-
lo...](https://www.bloomberg.com/news/articles/2016-12-20/uber-s-loss-
exceeds-800-million-in-third-quarter-on-1-7-billion-in-net-revenue)

~~~
hmate9
$800 million / quarter = $103 / second. Wow.

~~~
username223
Wow, indeed. They're lighting 445 kg of $20 bills on fire per day. That's
probably enough to stay warm at the South Pole.

------
falloutx
In my opinion, giving large scale subsidies to customers seems like a business
anti-pattern, and is surely gonna kill a lot of startups in near future.

I have been sold to the Idea that Investors are killing any Internet
"Business" by advising Founders against simple & straight-forward business
plans. They constantly ask founders not to monetize earlier and wait until
founders have no choice but to trash out the company/app to advertisers. The
End Result is that founders get more and more scared of asking their customers
for money.

If It was upto me, I would take 1000 paying customers over 100k free customers
any day. Also this would mean free customers(subsidized customers in Uber's
case) not hogging company's valueable resources and company could better serve
lower number of paying customers.

Edit: I don't really know how to spell "customer".

~~~
samfisher83
Bing might be 90% as good as google, but when people are trying to search for
something they are just going to use google. I really started to realize how
useful Uber was when i was traveling internationally I just pulled out my
phone and a car came. I didn't have to worry about what the rate was going to
be. It might have even been above what a taxi might charge, but at least I
knew what the cost was going to be. It just kind of works.

~~~
Ben-G
I touched on this point in the post. If there's a significantly cheaper local
competitor, most people will be happy to use that service when they're home.
Then they'll use Uber (or some other globally operating competitor) while they
travel.

~~~
kuschku
Especially if Dobrindts "A single app to book all taxis, carsharing companies,
car rentals, train or bus tickets, in all of Germany" takes off.

------
ahuja_s
I live in Singapore and Uber is a little cheaper than the excellent cab
services which operated here even before Uber. There is a big competitor to
Uber here called Grab. I switched to Uber because their service is good,
drivers are gracious and cars are nice and they give me good offers. Last year
I took 300 Uber rides, never once taking the usual Comfort Delgro Cab because
their drivers suck. If prices were the same, I would pick an Uber over the
traditional cab over 90% of the time due to nicer drivers and service
consistency across geographies. The rest of the 10% is when I urgently just
need to hail a cab.

I don't think you meant to say that Uber won't be a success. You probably
meant that you feel it's over valued. Uber is a success. People love it. They
pay surge prices for it. I do it all the time. It MAY be over valued but it is
already a success. wake up.

~~~
earthtolazlo
It lost 2-3 billion dollars last year and shows no signs of improving its
margins anytime soon. How is that a success?

~~~
vadym909
So then Amazon is not a success either?

~~~
mcguire
Can you explain what Amazon's end game will be?

~~~
ahuja_s
It's customers are fucking g happy. What's the end game you're talking about?
Have you invested into them? As a customer I LOVE them. As a student, I
studied them in HBX.

~~~
mcguire
In 2015, Amazon made $596,000,000 on revenues of $107,006,000,000, or a profit
margin of 0.6%. In 2012 and 2014, it lost money. How long should investors
wait to see a real profit? Should they expect revenue growth to continue
indefinitely?

~~~
jrockway
How much profit should they make?

If there was a machine where you could insert a 20 dollar bill and it spit out
the 20 and an additional 12 cents, would you not use that machine?

How much would you pay to buy one?

~~~
DontGiveTwoFlux
Except that if you buy the Berkshire Hathaway machine you'll put in $20 and
get back a dollar.

------
Keyframe
I don't understand his point. Maybe I'm dense (today, ha).

If Uber has a (simplified) split cost per drive consisting of vehicle
(+maintenance) and/or fuel & driver. If subsidised part is generally covering
the driver part. When you replace driver with autonomous vehicle and you
remove subsidies, you're left with a sustainable (presumably) model on a
certain margin that is already rolling. Rolling in a sense that it is already
an established business - people know it and use it. You've used subsidies
(well, investors cash) to build a business.

Of course, this relies on a presumption they will build a sustainable model on
replacing drivers with autonomous vehicles. It also presumes they will not
venture into other, (potentially) more profitable business like logistics.

One thing is certain. They are positioning themselves for a great catch which
relies on few key components working in the (near) future.

I think real hazard for Uber is regulation (autonomous vehicles for example)
and market regulations (see taxi debates in Europe).

~~~
beezischillin
The Uber we know right now will probably transition into the self-driving car-
based company for freight, passenger transport and ride sharing. It'll be a
bit unsettling to see what'll happen to the drivers they're using right now.

I personally think that Uber is not an ethical company (I do live in Europe).
They are exploiting tax and legal loopholes to profit off of both drivers and
countries, simply because regulation for a taxi company that would be set up
like Uber is does not exist yet and most countries take their time to
regulate.

When Uber is put up to the same scrutiny as taxi companies are (to ensure
their drivers are up to the same standard), they refuse to compete and instead
of paying the same tax everyone else does and abiding by the same regulations
everyone else does, they just leave the market.

Don't misunderstand me, taxi service in my country is horrible, they're
useless and rude and service is generally bad, but just because that's the
situation, we should try and improve that, instead of allowing companies like
Uber to exploit the situation.

~~~
benchaney
>Don't misunderstand me, taxi service in my country is horrible, they're
useless and rude and service is generally bad, but just because that's the
situation, we should try and improve that, instead of allowing companies like
Uber to exploit the situation.

I don't really understand this mentality. You don't want to let them exploit
the situation by profiting off of making things better for consumers?

~~~
beezischillin
I do believe that I as a consumer am entitled to receiving good customer
service for the money I pay for. I do understand that sometimes people can
have bad days and I don't mind that, consistently horrible service and a bad
system irritates me and I think it's not fair, but it is kind of a one-sided
world view, and I personally don't permit that to myself.

On the long run this is a financial equation, it might be more comfortable for
consumers at the moment to hail a cab with their phones and use their credit
cards to pay, receive better service, et cetera, but let's take into account
the long term price paid by them. Letting foreign companies exploit both tax
and regulatory laws to take as much money out of the country as possible
before getting shot down is not a good strategy on the long term. Start-ups
can get away with it, because at the end of the day the only thing that
matters is that they seem "exciting" and "booming".

The same way we aren't especially happy with the people who got exposed in the
Panama Papers, or Donald Trump publicly admitting that he doesn't care and
will abuse the system, we kind of have to draw a line. If we all decide to do
the same, because laws and taxes are not convenient to our short term goals or
let other entities do it, it's just gonna backfire at the consumer on the long
term, when infrastructure and lives depend on a government having money. Let
us not even mention the whole international tax situation, it being as
problematic as it is. (Just look at what's going on with Ireland)

------
dchuk
Uber's current problem is they have run out of things to innovate on. They've
pretty much nailed the UX in their app, and all they're left with is cars
taking people from Point A to Point B. What is left to improve on there?

So now, their only way to grow is to race to the bottom on price and undercut
their competitors. And the only way to do that is to light billions of VC
dollars on fire in the form of subsidized trips. That money isn't being
invested in R&D or any form of innovation, just bridging the price gap between
what the ride should cost (because of driver + vehicle costs) and what they
are charging (which is a stupid low price most of the time).

The longshot they're taking on innovating by transitioning to self driving
cars is downright reckless considering nearly all experts agree we're at a
MINIMUM 5 years off from anything feasible in the real world, more likely 10+
years.

So they're going to have to raise their prices, or continue raising funds at
an absurd rate (mind you, they've already raised $13,000,000,000 damn
dollars). And they'll have to continue to light that VC money on fire in
subsidized rides, rather than innovating on their product, because there's not
really any other way to innovate on these rides.

As for the subsidies, I can't even understand why they are lowering their
prices so aggressively anymore. It feels like each time I get into an Uber
it's slightly cheaper. I was happy paying $25 for an uber to the airport
rather than $30 for a cab, but now it's something like $14, which is great for
my wallet, but I really don't even need it that cheap. It's bizarre.

~~~
alikoneko
> They've pretty much nailed the UX in their app ...

Ehhhh....I disagree because I have a less than stellar UX every time I use it.
However, my situation is more or less an edge case. I rely on Uber to take me
from the train station to work every morning. The train station is right by
FLL. It's even called the Fort Lauderdale AIRPORT Station at Dania Beach. I
have to call the drivers and tell them I'm at the train station and not the
airport every time, and sometimes, they'll cancel or just go to the airport
anyway. The GPS will place me at the airport sometimes too for extra fun. I've
reported this several times to Uber, and it's still not fixed. It's also
important to note a self driving car would make my situation worse (no one to
contact when/if the app gets it wrong).

I would switch to Lyft, but after having a driver flat out refuse a fare, and
leave me stranded in Miami, I'm not so keen on that idea.

~~~
dchuk
I wonder how much of those issues are Google Map's "fault"? (genuinely
curious). I have the same issue where every damn time the uber tries to pick
me up in the alley behind my apartment, not the street, for no good reason.

------
cody3222
The network effects are pretty obvious actually: as the number of people on
the platform increases, the amount of time a driver has to drive to pick you
up becomes increasingly shorter, thus enabling the drivers to spend more of
their time with a passenger in their car (which is when they are earning
money). If drivers are making more money, Uber can pay them less (reduce the
subsidy).

Old taxi cab companies can't compete because they have to drive much farther
on average for each pickup

~~~
arbuge
Uber built its network city by city and a competitor could do likewise. As
others have pointed out, most rides are local - if you live in Dallas, TX, you
probably require rides mostly in Dallas, TX. If a hypothetically better (in
some way) competitor came along that only served Dallas, you might be
interested in trying it out.

So a competitor could just focus on Dallas to start out, raising enough
capital to hire enough initial drivers for acceptable wait times in Dallas
only. Once Dallas was successful, they could then go on to other cities.

This is unlike a website such as Ebay, which truly becomes stronger and
stronger due to national and international network effects, not just local
ones. If a user selling the beanie babies you want is in Atlanta, having them
shipped to Dallas is hardly more difficult than having them shipped within
Dallas itself. So that Atlanta user has increased the utility of Ebay to you.

~~~
DrScump

      Uber built its network city by city and a competitor could do likewise.
    

A _smart_ competitor would cherry-pick the most profitable markets and ignore
the rest.

------
msoad
> Uber’s growth is fueled by subsidies

A lot of people think if their Uber/Lyft ride is cheaper than their
traditional taxi because it's subsidized. The lower fare for the most part is
due to extreme efficiency difference between a taxi company and Uber/Lyft.

1\. Uber/Lyft don't own the cars. They are leveraging car owners capital

2\. Uber/Lyft drivers are more efficient because they don't have to roam
around the city to find a passenger and they get notifications for when to
work. The system scales up and down on demand. No taxi company that owns cars
can do this.

3\. Uber and Lyft are more convenient for the passenger and it makes people to
use them more. I can definitely see myself and people around me to use
Uber/Lyft way more than taxi since they came along.

Uber and similar companies are purring cash into this growth because at the
end of the day they can make a profit because they are more efficient. And no,
it's not easy to make a clone. The network effect is huge!

~~~
tashoecraft
Uber is fueled heavily by subsidies. I took an Uber pool to work, set price of
$25. I was the only one picked up, but due to traffic it took ~1hr. The total
price that the driver saw was ~60. Someone paid that driver the $35, and it
wasn't me, it was Uber (venture capital). That is purely subsidizing and
artificially lowering prices.

~~~
nullc
Underfilled pooling is not a great example though-- filling in load shortfall
on pooling is a very efficient way to spend money, because you need to build
the load, uber needs to only profit on average, and even if there was no
subsidy at all there would occasionally be underfilled cars.

For all you know they did five other trips like yours but with three
passengers and your "subsidy" was paid by them; and in exchange uber got a
happy passenger and driver which will continue to support their business in
the future.

------
exelius
I think Uber's business model relies on self-driving cars. They're paying
subsidies now to build a brand -- the name "Uber" has become synonymous with
"pull out your cell phone and call for a ride" \-- that will be very valuable
once self-driving taxis become a commodity (which will happen shortly after
their introduction).

Uber is not a bet on who can build the most profitable taxi company now --
it's a bet on a brand in an industry that will rapidly commoditize. Given that
_literally everything else Uber does_ has been replicated by at least one team
at every hackathon I've been to in the last decade, there is very little
sustained advantage from technology.

The auto industry is at a crossroads: you have new upstarts like Tesla that
are very obviously planning to convert to a transit-as-a-service model. The
"old" auto industry (basically everyone that makes cars and is not Tesla) is
still struggling to adapt to a more "continuous development" model like Tesla.
Tesla's engineering process is far simpler -- an electric car replaces the
complex internal combustion drivetrain (an engine block that requires separate
air, water, oil and gasoline systems, plus the transmission) with a far
simpler electric engine.

The electric system in a Tesla is actually far simpler than your average car:
the sensor package in a modern internal combustion engine is an incredibly
complex piece of engineering. This gives them a huge cost advantage over
existing automakers -- if Tesla is providing transit as a service directly to
customers AND making/maintaining the vehicles themselves, that displaces a lot
of revenue (auto sales/maintenance to companies like Uber).

I think Uber will eventually merge with an auto manufacturer (and likely keep
the Uber branding since it's likely to be the most valuable part of the
company). They already have realized that Tesla is their biggest competition;
and I think that the autonomous driving deal with Ford is simply testing the
waters for a future acquisition.

15 years from now, most people will likely have 3 or 4 choices of how to get
somewhere by car: Uber, Tesla, Lyft and likely a mix of local / regional
companies. Brand value is powerful; and I guarantee you that at the end of
this, the Uber brand will be worth more than what they've put into it.

~~~
komali2
Agreed, and the author even sets us up for this - again and again he mentions
how the largest sink is the drivers, the largest cost is the drivers, the
biggest blocker is the drivers. Remove the drivers from the equation and
things suddenly become a lot simpler.

Imagine if instead of becoming an uber driver, you retrofit your car with an
Uber Automated Car Taxi Converter(c), "guaranteed to put your car to work for
you!"

~~~
amyjess
After having two nightmare drivers this week where I actually had to end the
ride early and get out of the car, I can't wait for self-driving cars, and
whatever service that rolls out self-driving cars first is going to get all of
my business.

~~~
exelius
Yeah; that's ultimately why Uber treats driver quality as a short term problem
and they don't do a lot more pre-employment checks... it's a problem they'll
fix by removing the drivers entirely; so better to sweep it under the rug and
by the time they get in trouble, it will be too late...

------
nstj
Warren Buffett summed up businesses like this quite well[0]:

> The worst sort of business is one that grows rapidly, requires significant
> capital to engender the growth, and then earns little or no money. Think
> airlines. Here a durable competitive advantage has proven elusive ever since
> the days of the Wright Brothers. Indeed, if a farsighted capitalist had been
> present at Kitty Hawk, he would have done his successors a huge favor by
> shooting Orville down.

[0]:
[http://www.berkshirehathaway.com/letters/2007ltr.pdf](http://www.berkshirehathaway.com/letters/2007ltr.pdf)

------
catcow
I've been an Uber driver for 2-years in a metro-area of about 1-million
people. The first year was rough, as Uber aggressively lowered rates and
royally screwed me over income-wise. But now, I'm making more than ever thanks
to the service scaling.

The author of this blog post admits that he hasn't run any numbers, and his
conclusions make that obvious. I've run the numbers, and I make part of my
living as an Uber driver (it's not busy enough in my city to do this full-
time). Uber doesn't worry about my expenses because it's not their job to
worry about my expenses. Their job is to run their servers and make an app
that customers want to use, and they've been doing a great job at that IMO. My
job is to worry about my expenses, and yes, I've accounted for fuel,
maintenance, and depreciation of my vehicle, and I am making enough profit to
make it worth doing.

As for self-driving cars, Travis has publicly stated that Uber does not intend
to own and maintain them, they are going to look to their former drivers to do
that. I doubt Uber is planning on having a monopoly for self-driving cars,
they just want to be in on a part of the action, but their main focus will
probably always be the software of their core app.

Uber has created more jobs faster than any company in history, and this is
something our economy sorely needs. They literally let everyone who passes a
background check on their platform. That means no discrimination can even take
place at the company level, which I think is something very very cool,
especially since I have a serious health condition that has riddled my resume
with holes. (Discrimination can still take place from riders however, as the
ratings are what determine whether a driver stays as a driver or not.) Also,
since I am my own boss, I can rest when I need to, which is essential for
coping with my condition.

~~~
Mikho
Uber does not create jobs. Drivers are freelancers and not employees. It's not
job with all covered insurance, benefits, days out etc. Uber is exactly like
Upwork for freelance programmers and designers.

------
AndrewKemendo
How do you define a successful business? Is it solely based on return to
investors? How long does it need to be in business to be successful? How does
Uber define success?

I hear rumors that IBM is not successful anymore. Also same of GE and GM.

------
alexlatchford
The potential for autonomous point-to-point freight shipping should pay off
sooner than it's consumer business, allowing it to reduce it's investment
requirements. Debatable on the timelines though.

You assume though that the network they've built up isn't valuable when you
talk about self-driving vehicles. I agree the car tech will be commoditised
and to my mind Uber owning their own fleet isn't the best option. It'd be very
capital intensive and not a great use of cash.

I liken the switch to self driving cars to the same market as buy-to-let home
rentals. If you've got the money why not buy a one (or more) of them, send
them out and rent them through Uber/Lyft etc. and keep the money rolling in
around the clock. Uber takes a smaller cut but also doesn't incur anything
like as much risk.

~~~
mcguire
What prevents other logistics providers from driving the price down to
commodity levels?

~~~
rtkwe
Normal logistics providers have their own fleets and have to deal with the
depreciation and maintenance costs. Uber shifts all those costs onto their
drivers.

~~~
mcguire
That doesn't sound sustainable.

~~~
rtkwe
Car depreciation is a hard thing to get a real handle on so I bet a lot of
drivers aren't really thinking about exactly how much each mile is costing
them in the long run.

------
shawndrost
Why theorize about "economies of scale won't help"? We know the answer is "yes
they will" \-- Uber's US operations were profitable in 1Q16[1] and that
included many non-scaled markets.

Like I said 8 years ago[2]: "Facebook made ~$200mm in 2008. It's pretty clear
they could profit on those revenues, and instead are choosing to invest in
further growth (with outside capital)."

[1] [https://skift.com/2016/12/21/uber-isnt-profitable-in-the-
u-s...](https://skift.com/2016/12/21/uber-isnt-profitable-in-the-u-s-and-is-
on-track-to-lose-3-billion-in-2016/) [2]
[https://news.ycombinator.com/item?id=427212](https://news.ycombinator.com/item?id=427212)

~~~
zevyoura
From your first link:

> After turning a slight profit in the in the first quarter of this year, Uber
> lost $100 million in the U.S. in the second quarter. The loss increased in
> the third quarter, the person said.

That's not exactly a ringing endorsement of their U.S. business.

------
midnitewarrior
The author forgot another significant problem Uber faces.

When self driving fleets can be deployed for ride sharing, a new startup, one
without the hundred of millions / billions in losses that Uber will have
accumulated, will come on the scene.

How can Uber, a company with massive losses to recover from, compete with a
new, nimble and well-funded startup that doesn't have those legacy losses
weighing down their ability to raise capital and pay back investors?

~~~
ams6110
Bankruptcy/Reorganization.

------
iamcasen
What OP, and everyone in this thread don't seem to understand is that Uber has
waaaay more up it's sleeve than a mere taxi app.

Uber has more data about traffic patterns in every major city they operate in,
than any other entity, including the cities themselves. Uber can use that data
as leverage in so many ways.

They have an API, they are a logistics platform in a sense. Uber's endgame
will be allowing people to plug into that platform for a price.

If they can manage to become the defacto cab platform for all major US cities
alone, they are close to being worth their current valuation as is. Expand
this all over the globe.

Do not forget they have a 20% stake in Didi as well now, which will more than
make up for their 2 billion loss while trying to capture the chinese market.

~~~
jerf
"Uber has more data about traffic patterns in every major city they operate
in, than any other entity, including the cities themselves."

I imagine Google has approximately two to three orders of magnitude more data
from cellphones and maps usage. Pull open your Uber app, zoom out until you
see, say, 20 Uber drivers. They make a point here, a point there. The Android
phones in cars would just make lines on your display. So does Apple, probably,
or whoever gets the Apple Maps data.

I think Google won't be all that interested in packing that up and making it
available... but then again, if Uber's worth 68 billion on the back of that
data they may well change their mind.

~~~
LordHumungous
I'm pretty sure uber uses google maps in fact.

~~~
rrdharan
For now. They hired Brian McClendon to build their own:

[https://en.m.wikipedia.org/wiki/Brian_McClendon](https://en.m.wikipedia.org/wiki/Brian_McClendon)

------
kin
Investors are giving Uber a near infinite bankroll so it's hard to say that
they'll be allowed to fail.

I was in Southeast Asia recently and it's insane how cheap Uber is. It almost
doesn't make sense to take any other form of transportation. I imagine once
the competition dies, they'll have complete control over the market.

~~~
jdpedrie
The problem is that the moment Uber is in a position to exploit its newfound
monopoly, new competition springs up. Without regulatory constraints,
transportation on public infrastructure just isn't a natural monopoly
business.

------
pwellens
Interesting thoughts. I wrote along this line about UberEats and what is wrong
with their current model. They believe they can win the battle thanks to
subsidized unit economics. However this is simply not sustainable. The same
conclusion is valid for all on-demand delivery startups.

Instead they should leverage their existing community, i.e. users being
located next to each other. Similarly to UberPool where ride-sharing is the
only way for Uber/Lyft/etc to work, grouping users for food delivery with
variable rewards based on location (i.e. discounts) is the way to go.

More here: [https://medium.com/@pwellens/how-a-single-feature-could-
fina...](https://medium.com/@pwellens/how-a-single-feature-could-finally-hook-
you-on-ubereats-and-postmates-d31244e0073e#.p8j11qmgo)

------
jc_811
I agree with this, however I don't agree with the author's take on the self
driving car part. He says:

> Let’s assume that we will see fully autonomous vehicles that can navigate
> city traffic in the near future [...] If this technology becomes available,
> I doubt that Uber will have a monopoly on self-driving car technology.[...]I
> think it’s safe to say that many companies will have access to self-driving
> car technology.[...]In this scenario I don’t see how Uber can generate
> reasonable profits

In the ideal 'future' society, everyone will have a self-driving car they can
order to pick them up wherever they are. This would drive Uber out of
business. _However_ there will be a whole taxi industry for performing this
service when someone is outside of their own city.

I believe the taxis of the future will be there to assist someone in one of
two scenarios:

1.) Someone in their own city who doesn't own a self driving car

2.) Someone who is in a city different than their own

I still think there will be plenty of business in the above scenarios - and
Uber is positioning itself to be the industry leader/titan. It's definitely a
huge gamble since predicting the future is impossible at worst, and extremely
hard at best; but we'll see if Uber can stay afloat long enough to reach it.

------
dmitrygr
Possibility: seeing all this, Uber looks hard at what they do have and simply
becomes contract cab dispatcher for all cabs everywhere, smartly choosing
which cab to call to the scene of the caller using their algorithms. And lets
existing can companies so the actual driving.

Why? Currently some cab companies have shitty apps, others have none. Your
chances of getting a cab in a suburb of an unfamiliar city is zero. Uber can
fix that.

~~~
matthewaveryusa
The question then becomes: Is a global taxi dispatcher worth 70 billion
dollars? Maybe. Probably not.

~~~
dajohnson89
My hunch is yes. I decided to do some quick math.

-NYC has ~13,605 licensed taxicabs.

-The average annual net income for a NYC taxi (in 2015, probably a bit lower now) was $58,555.

-$58,555 * 13,605 = $796,640,775

This figure is for taxis only, in one (big) city. It leads me to think that
$70 billion is not an absurd number, globally.

edit: sources: [https://www.yellowcabnyctaxi.com/blog/new-york-city-taxi-
rev...](https://www.yellowcabnyctaxi.com/blog/new-york-city-taxi-revenue-
declines-accelerate-in-last-four-months)

[https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City](https://en.wikipedia.org/wiki/Taxicabs_of_New_York_City)

~~~
hx87
I doubt even a monopoly dispatcher will get all $800 million of the revenue
though.

------
mcguire
Tl;dr: Uber is using rule 1 of Monopoly 101: Subsidize your customers until
you drive your competitors out of business. However, it does not appear they
have a competitive advantage to prevent new competitors.

Edit: damn you, android keyboard!

------
spanktheuser
Two possible ways Uber may expand the market, based on what I've seen in
Chicago:

* Uber seems to do a much better job of serving non-wealthy & minority neighborhoods. I can't find an online source, but distinctly remember a local NPR report that claimed over 2MM Uber rides originated or concluded in an underserved neighborhood, vs. about 200,000 taxi rides.

* Anecdotally, Uber's superior experience is changing behavior. Despite having a thriving taxi industry, hailing a taxi is very unpredictable. If it's cold, raining, a busy night, too early, too late, or rush hour, you may be waiting a long time even in a well-served neighborhood. Uber practically guarantees a ride, meaning that I and my friends are far more likely to venture out. Overall demand for transport seems to have increased.

* Similarly, the reliability of ride sharing services permits many people to avoid car ownership all together. Zip + Uber/Lyft is a very compelling and affordable alternative to car payments, fuel, rented parking and insurance.

~~~
DrScump

      Uber seems to do a much better job of serving non-wealthy & minority neighborhoods
    

When was the last time you took an Uber from O'Hare to the most dangerous
areas of the South Side after dark?

Cab drivers are _obligated_ by the terms of their licensing to take you, once
you've hailed them. An Uber driver can just ignore you.

------
jaypaulynice
Uber will be successful, but the problem is right now there is no barrier to
entry in the market. They're pushing Lyft to spend more on marketing in order
to get shares.

Uber has a huge chance of taking over public transportation and making it more
effective. That's what I think they're gunning for...to privatize public
transportation. How else will you get around town?

------
pweissbrod
It's an interesting topic but the financials are too black-box for us
outsiders to form a strong opinion.

Yes the drivers are subsidized but the prices fluctuate based on supply
throughout the day. On friday night in the city you can find uber prices
surpass taxi drivers. The future of Uber has too many variables to have a
strong stance on it's "success".

------
Mikho
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.

------
habosa
The arguments against Uber here are well-stated and have been posted elsewhere
(see Naked Capitalism's excellent 6-part series)

In these comments (and other HN threads) I see the same pro-Uber arguments
again and again so I will try my best to address them as I think they are
misguided.

> Uber is doing all this in anticipation of self-driving cars, which will
> change the economics of the whole operation.

The first and most obvious issue here is runway. True self-driving cars that
won't need a human in the driver's seat are probably 5 years away. Can Uber
lose 1-2B a year until then?

The second problem is that Uber won't have a monopoly on self driving car
tech. Google and others will get there around the same time. How will this be
a competitive advantage to Uber and not to Lyft or some yet-to-come
competitor?

> Uber is building network effects that will protect it from competitors.

Uber's network effect, if it has one, is at odds with the self-driving car
strategy. Right now Uber has the shortest ride waits because it has the most
drivers. If a driver is a robot, a well-capitalized competitor can just buy a
huge fleet and take over any local market.

So you can't have both the network effect and the self-driving fleet. And
without both, Uber is likely not worth anywhere near 70B.

> Taxis are just step 1. Uber is building a platform to bring anything or
> anyone from A to B.

A software platform for logistics would never be worth 70B. Period.

In Uber's meager attempts to generalize their own platform, such as Uber Eats,
they have not done very well.

If total knowledge about driving patterns and navigation is the real money-
maker, Google will have a big advantage with Maps/Waze data. In fact, most
Uber drivers are using Maps or Waze to drive anyway.

> Uber's customer experience is so good I stopped using Taxis.

Uber's current dominance can be explained by one thing: price. Analysis has
shown that every Uber ride is subsidized by about 50%, even in mature markets.
If Uber suddenly doubled all prices they'd lose customers in droves.

As for driver quality, any long-time Uber user can tell you this has gone down
to be about the same as a cab (slightly better, but not reliably better). The
average uber driver is just some guy doing whatever the GPS tells him to do.
It's low-wage work and Uber is pushing the wages down all the time, there's no
way you're going to keep high driver quality indefinitely.

------
iaw
Finally someone is saying it loudly. I've tried to make this point in the past
to no avail. If Lyft can hold out they _may_ survive over the long-term, but
the strategies that allow Uber to be dominant will also prevent it from being
profitable while maintaining market share.

------
mayerzahid
A large assumption I keep on seeing is because Uber will lead with self
driving cars people will just stop purchasing cars and use just self driving
ride sharing. I think that a portion of people will but many will still buy
their own self driving cars for multiple reasons. Time saved, comfort and
control of passenger experiences, and cash generating vehicle that can be
plugged into self driving network while it is not being used.

------
intrasight
Sure there are lots of losing scenarios. But there are a couple of winning
scenarios too, and one - becoming a natural monopoly in mobility services - is
a very big win indeed. I assume that the high valuation partially reflects
that very small but non-zero probability of success. Sure, the US government
doesn't like monopolies, but shutting one down involves proving that consumers
are being harmed.

Let's play out the monopoly scenario. Let's also assume that non-autonomous
vehicles are banned. I can't imagine any future scenario where that's not
true. So we have roads full of Uber vehicles and no other vehicles. The
government will choose to get out of the road building and maintenance
business. Uber will gladly step in and take on a 100 year lease on the entire
road infrastructure. They'll build their own autonomous recharging stations.
They'll build the robots that maintain the roads. They'll build the robots
that build the robots. Now Uber has really lived up to its name.

So contemplate what an autonomous mobility monopoly would do for Uber's
valuation.

------
maverick_iceman
People said similar things about Facebook/Instagram. Or even the internet as a
whole (Paul Krugman).

~~~
callalex
Those services don't have a fixed cost per unit. Please read the article
before commenting.

------
mmagin
As far as I can tell from how frequently Uber and Lyft give me discounts
whenever I don't use them for a few days, they're burning crazy amounts of VC
money just to grow.

If investment dries up before they get profitable, I think they're screwed.

------
Tloewald
The claim that taxi supply is sufficient in most cities to compete with Uber
aside from on price is clearly not based on much experience with taxis in the
US.

I grew up in Australia where every city is served by a small number of taxi
companies and central dispatch works great. In every US city I've lived or
visited (except NYC) the fragmentation of taxi companies and driver behavior
-- most DC cab drivers would refuse to accept credit cards even after it
became illegal not to ("my machine she is broken") -- makes taxis worse in
every dimension than Uber, and frequently too unreliable to use for things
like trips to airports. (In Sydney, I would take a taxi to the airport, in any
US city you'd book a van.)

It's not just price -- fragmentation makes dispatch hopeless because the
individual companies have too few taxis in their pool and don't hand off
bookings to each other efficiently, and local regulations are a nightmare,
e.g. in the Washington DC metro area it's painful to get taxis from Arlington
(VA) to downtown (DC) and vice versa (Arlington is literally only not downtown
DC because Virginia asked for its corner of DC back, we're talking 2 mile
rides), and you need to guess which taxi company to use because dispatch is
also fragmented and broken. When Uber and Lyft appeared we simply stopped
using taxis cold. (Our favorite DC Uber driver was a limo driver who simply
used Uber to make money in down-time, and he was clearly not confused about
tax and costs.)

I think the idea that privately owned self-driving cars will compete with Uber
is wrongheaded but doesn't damage the argument. Any dispatch service that
achieves critical mass -- public or private -- can leverage self-driving cars
to compete with Uber. I think self-driving cars will vastly reduce car
ownership, and pools of automatic taxis will replace them, reduce congestion,
and allow lots of car-dedicated space in cities to be reclaimed. I'd argue
this threatens Uber's ride-sharing business as much as anything else.

I agree that Uber is almost a victim of its valuation -- it could be
incredibly valuable as a virtual integrated vehicle dispatch -- tracking
driver and customer quality, vehicle location and capability, and matching
vehicles to needs and collecting fares, but by trying to own everything and be
valued accordingly it may risk implosion when it fails to deliver.

------
cja
Their algorithms increase the usage of each car, reducing the cost per
passenger mile. So Uber can cheaper than normal taxis.

My own self driving car is unlikely to be cheaper to buy than my manually
driven car. But the self driving Uber will be significantly cheaper to run
than one with a driver.

I can't wait til I no longer need my own car. Uber, and competitors, are the
future.

------
konschubert
If I could bet against Uber, I would do it

~~~
intrasight
How would one short a pre-IPO company. Betting sites?

~~~
epistasis
The difficulty of shorting something like Uber is getting the timing right.
Not only do you have to bet that Uber is over-valued, you also have to bet
about the timing of when Uber runs out of starry-eyed investors to fuel the
valuations. That is dependent on when it runs out of money, how quickly Uber
decides to burn, and when the financials become clear enough to enough people
that the public decides that the emperor has no clothes. (If it's actually the
case that the emperor has no clothes.)

~~~
intrasight
We did see the same doubters in the early days of Amazon. And we see how that
turned out. Personally, I'm not confident of either success or failure with
Uber. They (and their investors) are making a big gamble. In their favor is
that it is a very capital-intensive gamble, and I don't see any other
companies stepping forward to make that investment. A large car company could
do so, but they've not made the transition to thinking in terms of the future
"autonomous mobility services" paradigm.

~~~
epistasis
I think the doubts about Amazon were different though. The doubt was whether
they would succeed at their goal, rather than whether the goal would actually
constitute financial success. Wal-mart for the digital era is clearly a
successful position, and Amazon didn't subsidize their product to the degree
that Uber has had to.

~~~
intrasight
I respectfully disagree. Amazon MASSIVELY subsidized their service. It was
commonly stated, and I believe true, that shareholders were paying for that
critical 2-day free shipping.

~~~
epistasis
In, say, 2006, $884M was spent on shipping and $567M in shipping revenue[1],
so there was a subsidy of $317M. This was in total revenue of $10.71B[2].
That's a 3% subsidy, and is within a profit margin.

Uber is a bit harder to pin down from a quick google [3]. I'm seeing $750M
loss in the recent quarter, which are "largely" attributed to driver subsidies
by third parties, but Uber isn't talking. Let's say $500 as a rough estimate,
which is 10% of the $5B in bookings that quarter.

So I guess Uber's subsidies aren't as high as I thought, but are still
significantly higher than Amazon's. They both operate in cut throat industries
with slim margins. Whereas Amazon invested in warehouses and their
infrastructure. Uber may have something up their sleeve, and I hope they do,
but it's not clear for an outside observer how they are anywhere as likely as
Amazon was to have profits to justify their valuation.

[1] [https://www.statista.com/statistics/236503/amazons-annual-
sh...](https://www.statista.com/statistics/236503/amazons-annual-shipping-
revenue-and-outbound-shipping-costs/)

[2]
[http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenu...](http://www.wikinvest.com/stock/Amazon.com_\(AMZN\)/Data/Revenue/2006/Q1)

[3] [https://www.bloomberg.com/news/articles/2016-08-25/uber-
lose...](https://www.bloomberg.com/news/articles/2016-08-25/uber-loses-at-
least-1-2-billion-in-first-half-of-2016)

------
zby
Why everyone assumes that Uber could be allowed to become a monopoly? There
are anti-monopoly laws. I understand that so far Uber was allowed to break
lots of laws - but this cannot go on indefinitely.

------
sytelus
This is zero information article. In fact, zero insight article. Getting in to
app-based cab business is hard because you need users so drivers come in and
you need drivers so users come in. Its chicken and egg problem. The only known
ways to break this is put up a huge hussle. Uber is just doing that and if its
successful at it then it can virtually monopolize this segment and rip
benefits years later like Amazon. Every one can make cab app, but not every
one can get millions of users for their cab app.

------
Wissmania
Just as a response to the first section, you can't say that Uber is
subsidizing both customers and drivers like they are separate costs. There is
some margin, which is the difference between what the customer pays and what
the driver gets paid. Currently this margin is negative, which means that Uber
is "subsidizing" the transaction by paying the difference themselves. For any
given ride the customer subsidy and the driver subsidy are same thing, Uber
doesn't pay twice.

------
jupp0r
The author makes good points, but his understanding of Ubers vision is very
limited. It's not about drivers or passengers, it's an API to get stuff from A
to B, be it people or goods.

Also, describing self driving cars in city traffic as "unlikely" really misses
the point that self driving cars are driving in city traffic right now and
have been doing that for years. They are too expensive to be commercially
viable, but that's definitely going to change in the near future.

------
anabis
Whether Uber achieves redemption and become a highly profitable monopoly, or
other players make it a low-margin red ocean, transportation seems to be set
to be dominated by few players compared to today's diffuse private ownership.

I wonder how road building and maintenance will change? Will the decision to
build or scrap a road be decided by a negotiation between the dominant
stakeholders, instead of public procurement?

------
tommynicholas
"Network effects are mostly irrelevant for Uber’s business. Yes, they need a
large supply of drivers to make the service viable, but this isn’t an
advantage of Uber compared to regular cabs which have sufficient availability
in most cities."

I've never been to a city where there were a sufficient number of cabs except
for Manhattan specifically in NYC and London. Every other US city, the taxi
situation is bleak to unusable.

------
sakoht
To have a moat, they just need sufficient software/human
network/infrastructure/legal infrastructure that competing requires too much
investment. All of these things are a PITA, and not immediately replicable by
fresh local competitors, even without the self-driving cars.

The self-driving cars and consistent platform could seal the deal against the
small players entering.

That's not to say their valuation is correct, or anything. :)

------
readhn4fun
I live near large city. I can't afford to live IN the city ( because paying
3000$ rent is stupid ). Now I have to commute. I have to Have a car because
other options waste too much time. I got a 16 year old reliable toyota that I
paid 3k for years ago. I don't see Uber doing anything financially positive
for me anytime soon.

------
cdrake
Uber isn't an on demand ride service. They're a logistics company. Also uber
isn't waiting for autonomous vehicles to come along and save them, they're one
of the industry leaders in developing autonomous systems, investing/acquiring
autonomous systems, and collect more driver/vehicle data than any other
company in the world. It's not just civilian transportation either. They've
already launched an autonomous commercial shipping service. If there is an
item, person, or service that could potentially need to be transported from
point A to B, it's a safe to assume that Uber has already started collecting
logistics data on it and will(or already has) raise funds to begin
implementing a network to service said logistical situation. This all may
sound a bit extreme at first glance, but look at amazon. Amazon isn't a
revolutionary e-commerce market place, they're a revolutionary logistics
company. It's the same story as uber just in a different phase. Years of
massive losses and outside funding. Both companies fully understand the
value/defensibility of heavily investing in operational logistics at massive
scale.

------
trimal
As you suggested, eventually Uber will have to make profit but also keep
profit margin very thin not to loose customer. Their only hope could be in
future most people in cities would not have their own car and rely completely
on ride sharing. This massive increase in ridership should help them to make
money.

------
bangda
Sometimes due to heavy rains or unfavourable weather , getting a uber or even
a normal cab becomes really difficult. I am from India ( so it happens here) .
Facing that kind of situation may deter from people giving up owning a car.

------
MarkMc
Here is an additional risk for Uber: What if Tesla or Google or some other
company bring self-driving technology to market a year before Uber? For those
12 months Uber will be the guy with a knife in a gunfight.

------
twitchard
I've said it before and I'll say it again -- Uber needs to release a tier
where you can hire a backhoe or other construction vehicle and arrive at your
destination in style.

------
mirekrusin
The only thing they need to do, from investor perspective, is to slide on
profit/loss margin line while eating market in big chunks - until human
drivers can be phased out.

------
abalone
tl;dr He thinks UberPool _is_ a viable business with network effects, but
Uber's valuation is too high.

He didn't really support that well though. If everybody uses UberPool because
the economy of scale tied to the network size is unbeatable, that's a lot of
riders. It doesn't seem impossible on its face that owning the future
replacement for public transport for like half the world wouldn't justify a
high valuation.

~~~
petra
This dismisal of UberPool is something we from many people who discuss Uber's
business. I wonder why.

~~~
ghaff
Because people taking taxis/Ubers don't generally like to share rides. See
also car pools.

Now there is an argument that, given sufficient scale and intelligent routing,
some sort of jitney bus system could work in a space between private taxis,
driving yourself, and scheduled buses. Though that person would then need to
explain why we don't really see this business model at any real scale today
(in wealthier countries).

------
Fricken
Many tales have been woven about Uber's imminent demise based on these vague
financials that come from a single unverified anonymous source.

------
aashaykumar92
Depends on how you define success. Imo, Uber will become financially
successful when autonomous cars and trucks work well and are regulated.

~~~
gaspar
The problem is that Uber can easily be destroyed when that happens. For
example, imagine that all the German automakers decide that their fleet of
autonomous cars works only for an app that they developed(maximize profits).
The same can happen from the Japanese automakers, etc. Another problem is that
they will need A LOT of money to buy and maintain all those autonomous cars,
something that they don't do now. Personally I think Uber can die under
hundreds of scenarios and survive under one or two in the long run.

------
return0
For some reason Uber reminds me of the rental car business. Yeah it appears to
be hard to build a monopoly there.

------
leecarraher
uber offers a better product than taxi services do. So if uber raised their
rates to be comparable to a taxi services, i would still use uber because its
a better experience. And because i learned that because they incentive it with
overall lower rates.

~~~
ghaff
>uber offers a better product than taxi services do.

Sometimes. I like not handling credit cards and cash. They're faster and more
available in areas where taxi services are not great.

On the other hand, I had an Uber-X driver just today drive right past a
clearly marked airport terminal entrance because his GPS didn't direct him
there and "he hadn't been out to the airport in a while." It's unlikely that
would happen with a cab.

~~~
ctpide
Yes, but it's also not uncommon that cab drivers use their knowledge of the
local streets in their advantage, which is a lot less likely when your average
Uber driver relies on GPS navigation.

I particularly remember taking a cab in Las Vegas many years ago trying to get
from one end of the strip to the other. I was an obvious tourist - so he took
the "faster router" around the city - just to "realise" that the exit he was
going to take was blocked due to construction work and he now had to do a huge
detour.

~~~
ghaff
That's fair. The GPS nav does tend to eliminate obviously scammy behavior
which historically has been a significant issue with cabs. (Never personally
had an issue in Vegas but have elsewhere.) But it also eliminates local
knowledge optimization as well.

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cryptozeus
Amzn and tsla started reporting profits just recently. Would you call them
failure?

~~~
zitterbewegung
Amzn is profitable without burning through investment capital. Tesla is in a
much better position but it also could still fail .

~~~
sharemywin
Amzn prints money with web services. practically 0 marginal costs.

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marcamillion
I think one of the biggest points being missed here is that Uber may very well
be an iceberg. Meaning moving people is literally just the tip, but to get to
the rest you have to subsidize the hell out of moving people.

The fundamental problem with what Benjamin pointed out with the lack of
benefits with network effects, only applies when you are thinking about moving
people and only thinking about 1 singular network. Sure, you and I may only
want to go from point A to B within my city.

I think the real value for Uber is when they have this huge network of
constant activity between most points within any city/country, the value
proposition to carry cargo goes through the roof.

Imagine being able to send a document (or a package) anywhere else within the
city in 20 minutes.

Amazon is experimenting with Drones for quick delivery, but just imagine being
able to purchase something on Amazon, Walmart, Target, and get it within 30
minutes from an Uber driver.

Their network effect looks different than most others, say Facebook, because
the real value is a network effect of networks. i.e. they have highly
concentrated networks within cities, and they have a high concentration of
city-networks within states, and outward.

The clear value proposition there is one can easily move a package from your
house through your network within your city, to another network in an adjacent
city, and on and on to say the next state.

Right now, sure you can ship something 'overnight' via FedEx relatively long
distances within the US but technically it's not REALLY overnight.
Technically, you have to reach the FedEx store before some cut off time (say
12 noon), so that package can then be taken to their sorting facility and make
it out on the flight that night.

Imagine if there is the a real-time network where at any moment any package
can be placed on the network and be on the most efficient route to the
destination immediately. That's obviously the holy grail, but no longer do you
have packages sitting in sorting facilities and waiting on bulky planes to
take off.

They may not have these plans, but I have no inside knowledge and that's one
clear advantage I can see of having a network where something is always being
delivered between almost any 2 points within the network.

I assume that all of these investors are not dumb and neither is Kalanick and
his team, so I suspect there is a much larger logistics play than we can
imagine.

Just like Tesla isn't just a car company, but is also both a commercial power
(Southern California Edison) & oil company (Exxon) plus maybe an autonomous
delivery fleet all in one, I assume Uber is something similar we just can't
see it yet.

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ry4n413
Any word on IPO timeline?

~~~
iaw
Every time I've talked to their recruiters over the last couple years it was
"just around the corner."

