
Neither, and New: Lessons from Uber and Vision Fund - sidhanthp
https://stratechery.com/2019/neither-and-new-lessons-from-uber-and-vision-fund/
======
tempsy
I think Uber missed the opportunity to be a more full fledged wallet (which is
what Grab started a few years ago). They have a "cash" product now where you
can load money, but it's too little too late IMO, and the incentive to load
money vs use your cc is small (e.g. tiny discount).

Starbucks is the obvious model here...IIRC they have one of the most success
mobile payment apps in the country, even competing with Apple Pay despite
being relevant to them alone. They have something like $1.6 billion in
balances, which they can monetize (free loan + interest).

~~~
harryh
Starbucks' annual revenue is about 25 billion. Let's say they are making a
(very generous!) 5% on that balance. That's 80 million dollars or about 0.3%
of their annual revenue.

Starbucks doesn't run its payment app so they can make money on the float.

~~~
tempsy
Uh why would you consider it revenue? It’s more like risk free profit. Meaning
they keep some tiny amount of every cup of coffee sold, but 100% of interest
earned.

And it’s important enough that they call it out in their earnings report. And
the more interesting use case is that it’s a billion dollar 0% loan, not
necessarily that they make interest off it sitting in a bank.

~~~
harryh
_And the more interesting use case is that it’s a billion dollar 0% loan_

Maybe this would have been exciting a decade or two ago before interest rates
dropped so far. Now Startbucks can issue all the debt it wants for...checks
notes...about 2.3%.

~~~
tempsy
Ok. That is still more than 0. And it will continue to be 0 whether interest
rates rise or fall in the future. And you missed the other point about how
they actually move gift card liabilities to assets after a certain about of
time because people forget about balances, so it’s actually negative.

I think it’s a bit naive to think that holding $1.6b in balances is not useful
or meaningful to Starbucks or a company hoping to emulate their mobile wallet
success.

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amelius
What happens if people start ordering taxis from within Google Maps? And what
if Google Maps adds more taxi services? What if Android starts integrating the
function of ordering taxis that way? What would happen to Uber's value then?

You can't "own" a market unless you also entirely own the way people access
that market.

~~~
thrav
Have to transition taxis from meter to set-pricing first. The uncertainty of
getting into a cab and agreeing to pay an unknown price is a big part of why I
avoid them.

I’ve been hit with a ridiculous price at the end of a ride enough to distrust
the whole concept of giving them a blank check.

~~~
sp332
Some cities are better at this.
[https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_pa...](https://www.chicago.gov/city/en/depts/bacp/supp_info/2012_passenger_information.html)

~~~
jccooper
That's a pretty standard taxi price structure. Open, but not clear. I have no
idea based on that how much a trip will cost, even if somehow I managed to
keep that whole table memorized.

~~~
sp332
It seems like it could easily be combined with or even integrated into a maps
API like Google Maps. Plot the route and plug the length into the formula. I
guarantee it's simpler than Uber's formula.

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zwieback
When I was in Singapore I used the "grab" app, which is super popular and has
both regular taxis and uber-like drivers (and food and other stuff).

What's different about Singapore and grab? Seems like a good model to me but
it must involve heavy regulation to work.

~~~
JetSpiegel
Isn't Grab government-owned?

~~~
intev
No it isnt: [https://www.crunchbase.com/organization/grabtaxi#section-
inv...](https://www.crunchbase.com/organization/grabtaxi#section-investors)

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jonnydubowsky
Another great post. Does anyone know what software this blog is published with
that creates the hypertext bubble where the content can be extended in a
little pop up?

~~~
dvdhsu
I wondered as well, since I've seen it on Instapaper and marco.org, and always
wanted something similar! If you inspect the element, you'll see some
classnames that give it away:
[http://www.bigfootjs.com](http://www.bigfootjs.com)

~~~
jonnydubowsky
Instead of giving me a fish you taught me how to fish in this case thanks. I
know how the answer and picked up what is now an obvious method for figuring
it out myself next time. Much obliged

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luckydata
The whole beginning of the article is based on the assumption that Uber's
story is played out. I don't think we can call that one yet, IMHO the market
hasn't discovered what is Uber WORTH just yet.

~~~
onlyrealcuzzo
When does the market discover what something is worth? I only know of two main
lines of thinking:

1) that the market is more or less a random walk, and prices are approximately
random. 2) that the market is efficient and the price at all times accurately
reflects all available information.

So Uber is either priced accurately (forever) or randomly (forever). I'm not
familiar with a third line of thinking that it's random for a period of time
and then accurate. Or approximate for a period of time and then accurate.

~~~
azylman
The third line of thinking is a combination of the two: "In the short term,
the market is a voting machine. In the long term, the market is a weighing
machine". This is a popular quote from Benjamin Graham
([https://en.wikipedia.org/wiki/Benjamin_Graham](https://en.wikipedia.org/wiki/Benjamin_Graham)),
who taught Warren Buffett. It's basically the whole principle behind value
investing.

------
duxup
This seems to address the larger "what is a tech company" question. Laying
tech over the top of what are traditional businesses doesn't seem to result in
what we might expect as a tech company.

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rdlecler1
He’s forgetting that Uber’s goal is to be a driverless platform in which case
they’d capture significant portions of the drivers margin. Now a software
company.

On Vision Fund, he seems to think that there is only one viable VC model. I
happen to disagree. Warren Buffet made a lot of money investing in boring
companies, and now technology is spilling into ancient markets to transform
them. Seems like those companies could be just as big if not sufficiently
bigger than the incumbent.

~~~
paxys
> Uber’s goal is to be a driverless platform

Everyone keeps using this argument but I don't buy it. Uber itself hasn't once
stated that this is their goal, not even to shareholders. When the company was
founded in 2008 self driving cars weren't on anyone's radar. And it ignores
the fact that if/when self driving cars become viable the entire "ridesharing"
landscape will be instantly changed, and Uber will not have any inherent
advantages over Google, Cruise, all the auto manufacturers and any other one
of the 50+ companies currently in that space. Rather than connect riders and
drivers they would have to buy and maintain vehicles in every city in the
world.

Uber is currently, at best, keeping the self driving option open by putting
some research dollars into it. The fact that they are betting the future of
their company on it is just online speculation.

~~~
mbesto
> Uber itself hasn't once stated that this is their goal, not even to
> shareholders.

Uhhh what? This is patently false. So, like maybe, people think that this is
Uber's strategy, because they literally dictated it was part of their
strategy.

Autonomous vehicle is mentioned 103 times in their S-1. [0]

 _We also hope to add autonomous vehicles, delivery drones, and vertical
takeoff and landing vehicles to our network, along with other future
innovations._

 _Our Autonomous Driving Strategy

We are investing in technology to power the next generation of transportation.
Our Advanced Technologies Group (“ATG”) focuses on developing autonomous
vehicle technologies, which we believe have the long-term potential to provide
safer and more efficient rides and deliveries to consumers, as well as lower
prices. ATG was established in 2015 in Pittsburgh with 40 researchers from
Carnegie Robotics and Carnegie Mellon University. ATG has primary engineering
offices in Pittsburgh, San Francisco, and Toronto with over 1,000 employees.
ATG has built over 250 self-driving vehicles, collected data from millions of
autonomous vehicle testing miles, and completed tens of thousands of passenger
trips. Along the way to a potential future autonomous vehicle world, we
believe that there will be a long period of hybrid autonomy, in which
autonomous vehicles will be deployed gradually against specific use cases
while Drivers continue to serve most consumer demand. As we solve specific
autonomous use cases, we will deploy autonomous vehicles against them. Such
situations may include trips along a standard, well-mapped route in a
predictable environment in good weather. In other situations, such as those
that involve substantial traffic, complex routes, or unusual weather
conditions, we will continue to rely on Drivers. Moreover, high-demand events,
such as concerts or sporting events, will likely exceed the capacity of a
highly utilized, fully autonomous vehicle fleet and require the dynamic
addition of Drivers to the network in real time. Our regional on-the-ground
operations teams will be critical to maintaining reliable supply for such
high-demand events. Deciding which trip receives a vehicle driven by a Driver
and which receives an autonomous vehicle, and deploying both in real time
while maintaining liquidity in all situations, is a dynamic that we believe is
imperative for the success of an autonomous vehicle future. Accordingly, we
believe that we will be uniquely suited for this dynamic during the expected
long hybrid period of co-existence of Drivers and autonomous vehicles. Drivers
are therefore a critical and differentiating advantage for us and will
continue to be our valued partners for the long-term. We will continue to
partner with original equipment manufacturers (“OEMs”) and other technology
companies to determine how to most effectively leverage our network during the
transition to autonomous vehicle technologies._

 _Our Growth Strategy \- Investing in advanced technologies, including
autonomous vehicle technologies._

[0]
-[https://www.sec.gov/Archives/edgar/data/1543151/000119312519...](https://www.sec.gov/Archives/edgar/data/1543151/000119312519103850/d647752ds1.htm)

~~~
paxys
They are doing research, and have autonomous vehicles on their long-term
roadmap - that much is public knowledge. What I am arguing against is the
general belief that Uber's goal as a company is to get rid of human drivers.

~~~
mbesto
Reread what you just wrote. Why would a for profit company put time and effort
into research for a technology that replaces humans and that _not_ be part of
their goal? I'm thoroughly confused...

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yuy910616
This is a great article but I doubt many people will actually make it to the
second half...where everything is tied together.

~~~
zby
[https://stratechery.com/2019/what-is-a-tech-
company/](https://stratechery.com/2019/what-is-a-tech-company/) \- should
really be read first

~~~
davidivadavid
I read that article when it came out, and I still don't really understand the
obsession with putting a "tech" or "non-tech" label on companies.

Besides that, there are companies that do not satisfy the author's definition
that are pretty clear "technology" companies (e.g. Intel).

What explanatory power does the label have?

~~~
zby
It means different business strategy. Tech companies can have massive revenues
without having many employees. They write software, this is the initial big
fixed cost, then making a copy of the software or servicing another customer
in a SaaS is extremely cheap. This has not started with software - a factory
has the same characteristics in comparison with manufacture:
[https://medium.com/hackernoon/aggregators-
bffd36063a72](https://medium.com/hackernoon/aggregators-bffd36063a72) \- but
with sofware it goes on another level. The Stratchery article is great in
analysing all the angles of this.

~~~
davidivadavid
The point is that there's nothing particularly "tech" about these companies,
unless you're redefining the word completely. They're scalable companies.
They're low marginal cost companies. They're software companies. Fine. But
that's not what a "tech" company is.

This pervasive notion that the "tech sector" is software companies from the
Bay Area is creating an engineering brain drain that seems oblivious to the
fact there's technology in literally _every_ industry, and it's probably
damageable to innovation.

The Stratechery analysis seems to me to just restate obvious things using
homemade terms ("aggregators") and doesn't explain much. I must confess I
still don't understand the hype around that newsletter which to me has the
style and substance of run of the mill B-school case analyses. I wish there
was a "tech sector" equivalent of Matt Levine.

~~~
zby
In common language you might call a software house a tech company - but in the
context of business it is good to have a term that would distinguish companies
that are good candidates for facebook or google like growth. The "What is a
tech company" article is an analysis of what that means.

I kind of agree that Stratechery does a bit of word juggling - "aggregators"
are a good example of this - but I still like his writing because there is
more in them than just that :)

------
perseusprime11
Uber is a taxi company until it can show meaningful revenue from other
business models on its platform.

~~~
twic
Addison Lee is a taxi company. They operate in London and some other UK
cities. They have a website and an app where you can book taxis:

[https://www.addisonlee.com/apps/](https://www.addisonlee.com/apps/)

Having booked, a taxi comes and takes you somewhere, then your card gets
charged.

The service is substantially identical to Uber's. If Addison Lee is a taxi
company, Uber is a taxi company.

For extra resemblance, Addison Lee's drivers are notionally self-employed, but
they've recently been put through the same "actually they're employees"
wringer as Uber:

[https://www.crosslandsolicitors.com/site/cases/Addison-
Lee-v...](https://www.crosslandsolicitors.com/site/cases/Addison-Lee-v-Lange-
workers-gig-economy)

------
tosh
> I am not saying that the category isn’t viable, and technology truly makes
> these companies different than the incumbents in their space, but they are
> not necessarily tech companies either.

> Neither, and new.

