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Uber Founder Travis Kalanick Resigns as C.E.O. (nytimes.com)
2119 points by java_script on June 21, 2017 | hide | past | favorite | 1292 comments

This may kill Uber. Kalanick is a jerk, but he created that insane valuation. Uber has less than a year of runway left at their current burn rate. Unless they can find a bigger sucker than the sovereign wealth fund of Saudi Arabia,[1] they're going broke in 2018. (That "undisclosed amount" in 2017 isn't a significant investment on Uber's scale.)

IPO? No way. They'd have to publish audited numbers. What's leaked out is bad enough. The real numbers have to be worse. Notice that leveraged loan in 2016.[2] All the details of that have to be disclosed in the prospectus for an IPO.

[1] https://www.crunchbase.com/organization/uber/funding-rounds [2] https://techcrunch.com/2016/07/07/new-reports-confirm-1-15b-...

You're right, but I think that's exactly how/why Uber's investors were able to convince Kalanick to step down.

Uber may or may not take over the world at some point, but Uber needs another round of investment in the next 18 months just to survive. If the existing investors refused to play ball, they could kill the next round, which really would kill Uber.

And here's another important moral of this story for founders: Kalanick has a controlling interest in Uber, so on paper, nobody could have removed him as CEO by shareholder vote. But despite complete control over the vote, you don't really own your company if you're dependent on future investment.

No matter what the cap table says, if you're not profitable, it's not really yours yet.

I dunno, my guess is that he was too set in his ways to make the leap from "CEO of a growth startup" to "CEO of a mature company".

If you look at founder/CEOs who have made that leap, they all tend to be very young (Jobs, Gates, Zuck, etc) and had very strong teams behind them.

Someone like Kalanick - who has run multiple startups to various exits - has been running startups all his professional life. His management style likely works very well at a startup, where failure is assumed so risk tolerance is high. At a startup, you need a field general leading the troops into battle.

But at a large, maturing company, you need a different skill set. Risk tolerance becomes a negative attribute once the company grows so large you can't control the risk anymore. Rather than a field general, you need a therapist capable of massaging the egos of the executive team and the board of directors. The job becomes more strategic and political -- execution is assumed, and failure is no longer an option.

I don't think Kalanick is that guy, and I think the board finally convinced him of that. But if I was an investor, I'd still be happy to listen to his next startup pitch...

> I dunno, my guess is that he was too set in his ways to make the leap from "CEO of a growth startup" to "CEO of a mature company". If you look at founder/CEOs who have made that leap, they all tend to be very young (Jobs, Gates, Zuck, etc) and had very strong teams behind them.

And in Jobs' case, it took an absence from the company of more than 10 years…

Jobs got fired from apple.

Edit: Downvotes for simply stating a fact?

Precisely. And then he was brought back, and in retrospect, many of his skills the second time around (charisma, design instinct, product focus) were the same that he had brought to Apple originally, but in the meantime, he had learned to temper his worst personal flaws (largely by learning to trust and listen to a small group of people who could counteract them).

I saw Ed Catmull (Pixar) give a post-Jobs death talk on youtube about how Jobs had completely changed during his 10 year hiatus and was far more empathic.

so empathetic he didnt want to give Pixar employees even a cent of equity before the IPO.

Any chance there is a recording of this available online?

Very interested in this as well. Parent says it was on Youtube?

Edit: I imagine it's this interview at AllThingsD[1]. Ed jumps into this topic right off the bat.

1. https://youtu.be/U8kH5eZdIqA

In his book "Creativity, Inc" there is also a chapter "The Steve we knew" talking about this.

I'd say down votes because it wasn't clear whether Apple would have fallen if Jobs remained. He pushed the same vision when he came back as when he was fired.

Yeah but he was less of an asshole when he came back.

Was he?

He was an asshole of monumental proportions before and after. I am so far removed that I am a poor judge, what would be a good place to look into this.

That is why he was absent.

And then got rehired because Apple needed him

Apple is an electronics company.

Uber isn't a mature company. They're not profitable and are burning cash like crazy.

More like "CEO of a growth startup" to "fixer who can pull an over-valued startup out of a nose dive." That's a much tougher leap.

Melissa Mayer is looking for a job. ;)

I think you mean Marissa Mayer, no?

Melissa, whoever she is, probably has a better track record turning around nose dives of high profile firms.

So Uber is walking down the Twitter path you think?

Uber's valuation is still based on its growth. Therefore, it still needs to be a startup to justify this valuation and burn.

I'd argue that a "mature CEO" is not a fit for Uber which needs to keep growing or die.

Uber's valuation is based on a formula that looks something like (raw brand value in an autonomous car world) - (burn rate)^(number of years until autonomous cars are widespread).

The valuation can be quite high if you assume that the value in the exponent is low.

But I personally think that the "autonomous vehicle revolution" is not going to pay off as well for Uber as they had hoped. It's becoming more clear that the market for autonomous vehicles isn't going to look like the market for human-driven ones -- and vehicle manufacturers are going to be looking to build their own self-driving auto services rather than sell self-driving vehicles directly to consumers.

Uber's biggest innovation was their app. Even complex apps like Uber are not hard to clone if you have any sort of budget. There's an assumption a lot of investors make about their brand value: it assumes that another, already strong brand does not enter the same market. Seeing as Tesla has made no secret of their intentions to compete directly with Uber in the ride-hailing space, I don't think that's a fair assumption. Would you rather call an Uber or a Tesla at this point?

And what does buying a Tesla in that scenario even look like? Do you buy a car and rent it out a la Airbnb when you're not using it? How much money do you get for that, and how much of a cut does Tesla get since it's their algorithms actually driving the car?

Don't get me wrong; the brand value is actually really high because hundreds of millions of wealthy customers worldwide know Uber. Even if the company fails spectacularly, someone will buy them for a few billion in a fire sale just for the brand.

Tesla's taking a very long view. They are thinking about what the world will look like when autonomous cars are ubiquitous, and then working backwards from some of the pretty gnarly realizations that sink in when you do that sort of thinking.

You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go.

So what still matters? Price. Comfort. Amenities. The upsell becomes the main sell. At a certain point, Tesla isn't even selling "cars" so much as it's selling mobile offices to one segment, and mobile living rooms to another segment. I could also see Tesla finding a way to place the burden of price elsewhere and offer effectively "free" cars to consumers. For instance, leasing or selling fleets to employers. Or to cities. Or to Uber. Or to Amazon.

Uber, on the other hand, sees a world in which nobody owns a car, nobody drives a car, and everyone hails an automated car whenever and wherever. Like that scene in Minority Report.

Both of their strategies are banking on the idea that cars, as we currently understand and experience them, will eventually become pure commodities. The difference is that Tesla is seeking margin and Uber is seeking volume. The cliche that Tesla is Apple and Uber is Amazon is sort of true in that respect.

I think Tesla also understands that once autonomous cars are ubiquitous, you won't own one: you'll just rent one for whatever needs you have in that moment. I think the best analog for the market dynamics that this will create is the airline industry -- a fleet of vehicles will be a massive investment, and ongoing maintenance, government oversight, etc. will be similarly cumbersome. But the job of the airline (actually operating the plane) is being done by the company creating the algorithms. That's a market control point that can be leveraged.

That's why ultimately, I feel Uber will end up being the Expedia/Priceline of the self-driving car industry. If you don't control the means of value production, you become a middleman. There's a reason they were working on their own self-driving tech rather than licensing from someone else -- everyone who is actually building this tech likely told them "go shove it, we can recreate what you do far easier than you can recreate what we do".

I keep hearing this, but why wouldn't you own one? Part of the reason to own a car is the immediacy of use. I don't want to have to do the equivalent of waiting for a lyft/uber every time I want to run to the grocery store.

Sure in large walkable cities with constantly circulating fleets car ownership might go away. For those of us in the suburbs who HAVE to drive everywhere, not so much. Even waiting 5 extra minutes for every errand (optimistic, given that my most recent lyft took 10-15 minutes to arrive) adds up fast. Let alone going out into the rural areas where Uber/Lyft scarcely exist and the nearest human structure can be miles away.

I could, however easily see a model where people rent their self-driving car out to Uber/Lyft when they're not using it. Driver fees would be gone, and they could take a greater cut that might even put them towards profitability.

1) Cost

2) Configurability

Anyone who is price sensitive won't want to pay the hourly rate to have a car sit in their garage all day/night doing nothing. Nor will they want to pay the up front cost and/or interest to hold a controlling share in the vehicle.

And configurability means you can take a 2-seater when you are going to work, take a 4-seater to lunch with you coworkers, take a hatchback to the farmers market to pick up your groceries, and then an SUV to the mountains, preconfigured with a roof rack with your ski rentals already on it, sharpened and waxed, and then take a mobile office for the drive home so you can get some work done, and a mobile bedroom for your trip down to LA so you can catch up to sleep.

But yes, the wealthy will still own private cars because they can have it waiting, just like private planes. Also, cooties.

Plane travel isn't a day-to-day event, even for those wealthy enough to afford private jets. You still have to pack, travel to an airport, get on the plane, crew has to be made ready, flight plan has to be filed, etc. It's a high-impact event that occurs at most every few days, even for frequent flyers.

Driving is a day-to-day task. My time's already short, if I have to add an extra 5 minutes waiting for pickup every time I want to go anywhere (once again an optimistic estimate, it would likely be closer to 10), on a busy day that's a minimum extra hour a day of time I've lost just standing on the sidewalk. Margin matters, even an extra 15 minutes a day adds up to over 90 hours a year.

Also these rental services/configurations will hardly be free. So the cost of the car/maintenance isn't eliminated entirely. For my situation, given that I've been driving the same car for the last 11 years, and it was ~16k when I bought it, plus maybe an average $1200 a year in insurance, and maybe an average of $300 a year in maintenance that means I've spent an average of $2,954.54/year over the last 11 years on car ownership. And that number is only going to get smaller unless I buy another car.

But in this scenario I'm losing a minimum 90 hours per year on the margin. If those were work hours, then at my current take-home rate I can decrease that number down to around $1065/year going forward. Given that I'm likely going to make more money as the years go by, these continuous rental services are going to have to be awfully cheap to be worth it for my situation, and I don't think I'm too far from the average.

Now sure, if you're buying a new car every 4 years like some people do then it might be worth it. Or if the cost of insurance is prohibitively high in your given location. Or if your job sucks and you just can't afford a car. Or if you actually need a broad variety of vehicles on a regular basis. There are lots of factors that go into it, but for anyone who's middle class or better I don't think it'll supplant ownership entirely. Or maybe it will and I'll just be with the sour-grapes number-crunchers in the corner ranting about margin to anyone who'll listen. :)

> Also these rental services/configurations will hardly be free. So the cost of the car/maintenance isn't eliminated entirely. For my situation, given that I've been driving the same car for the last 11 years, and it was ~16k when I bought it, plus maybe an average $1200 a year in insurance, and maybe an average of $300 a year in maintenance that means I've spent an average of $2,954.54/year over the last 11 years on car ownership. And that number is only going to get smaller unless I buy another car.

Nope, but they will be commoditized. If you have a car that all you have to do is pass it an API key and a location, there's not much value a ride sharing service can add to that -- which means there will probably be a bunch of them. Which means that the price to the consumer should be something close to [ (marginal cost of ride) + (depreciation cost of ride) ] * 1.03. And the cost side of that will benefit from scale for the business, but not the consumer.

Basically, once it's commoditized, it will cost you more to do it yourself than to pay someone to do it for you. Just like with currently commoditized services like AWS, there can still be good reasons to do it yourself -- but those tend to be special cases rather than the norm.

> But in this scenario I'm losing a minimum 90 hours per year on the margin.

Err, I'll play along. If you were in an autonomous car (or even a current ride-share), you could just work while en route rather than drive. I'm willing to bet you spend more hours sitting in traffic today than you ever would waiting on a car to arrive.

Well hey if it somehow costs less than then I spend on car ownership in a year, then sure! All just depends on how much my time's worth/how much these services charge if/when they come around. But right now the sum total of rides per year, whatever the cost model, would basically have to be sub $1000 per year to make sense for me. Cheaper if I end up making more money as time goes on. If scale and commoditization can accomplish that then I'll happily embrace a new golden age of transportation.

As for the rest, keep in mind we're comparing renting an autonomous car vs owning an autonomous car, not renting an autonomous car vs driving. So the actual rides are equivalent. The time difference is me getting in my car and telling it where to go vs me hailing a car, waiting 5-10 minutes for it to arrive (where my capacity to do any meaningful work is basically nil) and then tell it where to go, a minimum of 3 times a day. Maybe up to 12 times a day on a busy day. That's not an insignificant time loss over the medium/long term.

Granted it's all hypothetical and the actual value of the time lost would be highly situational, but it would be one of those small daily time-sucking inefficiencies, like walking into the other room to get paper towels as opposed to just putting a roll in the kitchen. When you do them every day, those add up.

I suspect Tesla will be the next major story of burn rate fueled firms confronting reality...

Tesla is a different story entirely. Uber is burning cash by subsidizing operations (aka buying customers); Tesla is spending it on capital assets and R&D. Money spent on operations generally won't benefit you beyond the current quarter; but capital assets (including intellectual property as the result of R&D) retain value over time and often pay for themselves in a relatively short period of time.

You'll notice a common thread throughout Elon Musk's "big bets" (Tesla, SpaceX, etc.) He is extremely conservative with operational spending, and all of these companies are very capital-intensive. Just look at the difference between a "Tesla Store" (small, maybe 3 or 4 employees, cars can be stored offsite wherever is cheap) and a normal auto dealership (huge, dozens of employees, majority of expensive real estate is used for parking cars). The Tesla store is very efficient compared to the auto dealer.

When you have high capex, it makes it easier to fund your company through debt rather than equity since those loans/bonds are backed by capital assets with a non-zero liquidation value.

That's what many said about Facebook when they had their crazy valuation. The same was said of Google before they figured out ads.

Tesla has a brand value higher than any other car. It's not an app that can be easily replicated. The dynamics are not the same as Uber.

Owning a car and the freedom to travel whenever wherever for whatever reason is a fundamental American value that won't go away.

Sure it will, when cars are available on demand anytime you want one for however long you want it at the press of a button. Convenience changes values, and ownership sucks when that kind of convenience exists.

I don't think so. I'd much rather pay the cost of ownership than rental every time I wanted to move about.

By definition rental is going to be more expensive than ownership.

I don't doubt that companies will have fleets of cars for their employees, etc, but personal vehicles are not going to go away.

That's short sighted and incorrect. Rental is only going to cost more than ownership if multiple people aren't sharing the cost, but the whole point of autonomous cars defeats that idea, renting will be vastly cheaper than buying.

> but personal vehicles are not going to go away.

For the vast majority of the population, yes, they will go away.

If that was true everyone would live in hotels. Renting rides only makes sense in cities where the cost and inconvenience of parking are high.

Look at the quality of the interior of the average cab and you will see why a lot of people would prefer to own.

That's not good analogy (living in hotels), better would be to compare how many people own their flat/house and how many rent it. Which would imply that a lot of people will still own their car ...

Why should rental be more expensive by definition? A fleet of autonomous vehicles can operate 24/7. Your own personal car gets a trip to work and a trip back home every day and maybe another round trip to an activity or chore.

That depends on how much do you need to use a car. If you dont need it that frequently, renting is cheaper.

who in the world doesn't need a car that frequently?

young people, old people, and homeless people.

Everyone else needs a car frequently.

Those who live in Europe. Or anywhere with decent infrastructure.

> You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go.

Mileage is a critical component of cost of operation, and of range without stopping, which are pretty much (along with capacity and comfort) the things that matter most if you aren't driving and the car is just taking you from A to B.

That's even true if you don't own it (even the cost factor, since that—assuming an efficient market—still controls what you'll pay to use it.)

Maybe something like Will Smith's car in I,Robot movie is what I imagined while reading this. Faster than a bullet train and automated.

I don't think Uber's valuation is based on autonomous cars. That would be a really stupid bet for investors.

Autonomous cars are a side bet. A few hundred millions in R&D that would also attract good talent and nice PR for Uber.

But I don't think investors were stupid enough to invest billions into Uber based on that bet. Specially considering the fact that anyone who gets that technology first can make it big and Google had a few years of head start.

Uber's valuation has to be based on an anticipation of autonomous vehicles. Otherwise, whether self-driving cars arrive in 5 years or 10, investors are putting money into a horse-and-buggy company.

Not necessarily. If your projection is that widespread autonomous vehicles don't arrive for 30 years, there is a lot of money in the meantime to be made being a horse-and-buggy company.

Some business models are fundamentally broken, then the growth is eventually no longer effective in selling the story that one day the company will be profitable.

> who has run multiple startups to various exits

What has he done besides Red Swoosh? btw, Red Swoosh was sold to Akamai and then later disassembled when they realized there was no "there" there.

That's one probable story.

Another is that the board could have threatened to sue Kalanick for violating the loyalty and duty obligations that corporate officers have to shareholders - e.g. for suppressing systemic sexual harassment, withholding details about the Otto acquisition, etc.

This would never have happened.

How do you know that?

Have you ever seen a Board sue a CEO in a similar situation?

I also don't think the examples he cited are violations of those duties.

He may not, but I have seen a board threaten a CEO in a situation like that. It never came to a lawsuit, the CEO stepped down but this sort of thing definitely can happen depending on how bad the situation is.

Investors sue all the officers all the time. United Airlines, Ebay/Craigslist, Skype, non-profits, etc.

Suppressing systemic sexual harassment violates his duty to report management problems to the board. Same with any meetings with Otto's founder a week prior to them leaving Google and founding Otto.

Indeed. The CEO of Sears was recently sued by investors:


Can you explain how these large companies operate, explained like I'm a golden retriever?

How does a company so big not make a profit/could possibly go bankrupt?

My current understanding is companies either focus on growth (at a loss) or choose to focus on profit (with the risk of competition overtaking them or decay over time).

But lets say they go bankrupt in 1 year, couldn't they just switch to "profit mode"?

If there is no "profit mode" ... then why are people investing in the first place?

Companies in burgeoning industries at this scale are concerned with longevity, specifically outlasting their competitors. Not short term profits.

They are thinking more along the lines of "how can we make 10 billion dollars per year, for the next 150 years." Think General Electric.

That's why they require huge amounts of money from investors, so they can aggressively grow to a size where other companies can't touch them.

The huge amount of capital is sort of like a moat.

When you're larger, you have something called economy of scale. Which means you have enough resources to do stuff the smaller guys can't do.

When you're larger, you also have something called a data advantage. Which means you know so much more about your customers, you can predict things and make decisions the smaller guys can't.

As best I understand it, Uber's play was for dominance.

Consider Facebook and Google. Together they're worth over a trillion dollars. Now ask yourself: what's the combined net worth of the second-biggest search engine and the second-biggest social network? Nothing close.

In a business where being second or third place is pretty good, you can switch to profit mode as you please. But Uber's valuation only makes sense to me if it lets them dominate a market like Google or Facebook does, setting prices and terms for the industry. I think that if they switch to profit mode, people will start to value them like a normal business, which would mean a giant drop in valuation.

I presume that's why board members supported an aggressive jerk for so long: Kalanick has been undeniably good at seizing territory, and if one sets aside little things like morals and externalities and long-term consequences, one could argue that aggressive jerkiness is exactly what Uber has needed.

Honestly, this market never struck me as one where dominance was even possible, so the investors' theories never made sense to me. But that's my best guess as to why they've been allowed to keep burning money like this.

>But lets say they go bankrupt in 1 year, couldn't they just switch to "profit mode"?

Well that they might have to try and do now. But usually it is hard to move to 'profit mode' - you upset your customers when you start to charge double. The idea is that before you do that you have either killed of the competition or your competition 'moat' is so big that everyone wants to keep using you because of $reason and so you can charge what you like.

>If there is no "profit mode" ... then why are people investing in the first place?

Nobody is ever sure if any startup will get to 'profit mode' you simply look at their market / numbers etc and if you decide to invest then you hope the startup can figure it out. This is the investing gamble.

Here boy! Sit. Siiit. Sit!

Stay. Wait... wait.... go fetch!

You guys are talking about Uber dying, but I cannot fathom how this is possible from just the user's perspective. Uber seems to be everywhere, people take Ubers or driver for Ubers every day. How could a company this big fail?

Stop growing maybe, but going bankrupt and shutting down?

It's easy to grow when you sell dollars for 70c each. But, when you suddenly need to sell them for 1.01+$ nobody wants to buy.

Uber's problem is taxi companies have lower overhead because among other thing their drivers sometimes get hailed by people at street level. Which means their either taxi prices are lower and people stop using Uber or they pay drivers more and drivers mostly stop working for Uber.

Uber is profitable in certain cities, e.g. New York City [1]. They could turn cash-flow positive if they just gave up useless market share.

[1] http://www.businessinsider.com/ubers-revenue-profit-and-loss...

"Uber is profitable in certain cities, e.g. New York City [1]. They could turn cash-flow positive if they just gave up useless market share."

I would assume that would also depend on how much of their fixed costs they can shed in conjunction with that. Uber may not die quickly but it could still die slowly if they lose the ability to move forward because they had to cut too much of their R&D and sales infrastructure to get to that positive number.

Plus such a massive layoff would be a big red flag to customers too. By Uber's nature, a particular ride isn't a long-term commitment, but I think people would start looking for a stronger-looking horse even so. One of those differences between homo economus, who every time they need a ride rationally examines all their options regardless of the future and realizes that as long as Uber can complete this ride the internal state of Uber doesn't matter, and homo sapiens, who will take into account the fact that Uber doesn't seem to be doing well even if doesn't rationally matter at this particular point.

Their valuation is based upon the assumption that they can maintain market share and raise profitability in those other markets. We all know this isn't going to happen though, so eventually someone is going to eat the valuation hit but the game of musical chairs to decide that question is still being played.

I don't think their valuation makes sense. I'm more replying to the gist of this thread, which seems to be saying they're dead because they aren't profitable. They could be if they needed to prioritise that.

> someone is going to eat the valuation hit

Liquidation preferences mean earlier investors (and employees holding Common Stock) take the hit of a down round.

I thought liquidation preference mostly served VCs which could be earlier "earlier" investors no?

Disclaimer: this is not investment advice. Do not make investment decisions based off my Internet comments.

Let's say Company X has 9,000 shares of common stock outstanding. It raises $1 million at a $10 million post-money valuation with a 1x non-participating liquidation preference. Its cap table is thus 1,000 shares of Series A preferred stock on top of 9,000 shares of common.

It then raises $10 million at a $50 million valuation with similar preference terms. Its cap table is now 2,500 shares of Series B preferred stock on top of 1,000 shares of Series A preferred stock on top of 9,000 shares of common.

Let's contemplate a $100 million exit. Everyone converts to common at $100 million / 12,500 shares, or $8,000 per share. Series A bought at $1,000 and thus sees an 8x return; Series B bought at $4,000 and thus sees 2x.

Let's contemplate a $50 million exit. Everyone converts at $50 million / 12,500 shares, or $4,000 per share. Series A gets 4x; B comes out flat.

Let's contemplate a $25 million exit. Series B does not convert. Instead, it demands its 1x liquidation preference and gets $10 million. This leaves $15 million on the table, or $1,500 per share. Series A converts and sees its 1.5x return; B comes out flat.

Let's contemplate a $15 million exit. Series B does not convert and gets its $10 million. This leaves $5 million on the table, or $500 per share. Series A does not convert and demands its $1 million. Series A and B come out flat; common gets $4 million / 9,000 shares, or about $444.

Let's contemplate a $10 million exit. Series B gets its $10 million and comes out flat; everyone else gets screwed.

Let's contemplate a Theranos exit. Everyone gets screwed. Turtleneck doesn't go to jail.

TL; DR Later stages are least volatile. They get screwed last, but also see upside last. Lower rungs' returns pay for this safety.

Responding to Bogomipz:

> Can you walk me through the math. How does one arrive at 1K of Series A preferred from 9K of common stock? How is that being derived? I'm not following.

At time t=0 (probably at founding and when hiring its first few employees) Company X issued 9,000 shares of common stock. At time t=1 it decides to issue 1,000 shares in a series A offering (most likely to VCs and outside investors). They are separate events.

1000 shares x $1000/share = $1m raised for the company in the series A.

> Also what is meant by "post-money" valuation? I'm assuming there is a corresponding "pre-money"?


In this case, pre-money valuation of Company X = $10m - $1m = $9m

> Lastly by "coming out flat" you mean made whole again i.e recouped their initial investment? Thanks.


Thanks, the t=0 and t=1 and these being discrete events cleared this up for me. Cheers.

Thanks for your detailed explanation. I had a couple questions if you don't mind. You stated:

>"Let's say Company X has 9,000 shares of common stock outstanding. It raises $1 million at a $10 million post-money valuation with a 1x non-participating liquidation preference. Its cap table is thus 1,000 shares of Series A preferred stock on top of 9,000 shares of common."

Can you walk me through the math. How does one arrive at 1K of Series A preferred from 9K of common stock? How is that being derived? I'm not following.

Also what is meant by "post-money" valuation? I'm assuming there is a corresponding "pre-money"?

Lastly by "coming out flat" you mean made whole again i.e recouped their initial investment?


What is there to liquidate? Some espresso machines and office furniture? The software isn't worth much; it's been copied by several others already.

Is the profitability in NYC before or after we discovered they were cheating their drivers out of money?

And there aren't too many NYCs in the world.

In NYC, the Yellow cabs have a huge, huge overhead because of Taxi Medallions that used to cost $1.2 million each which effectively added $125 or so for a 12 hour shift. The value of the medallions are now < $700K, but I don't know if the $125 overhead is still in force.

Uber is far more expensive in NYC than other cities such as Chicago.

Now that Uber has allowed tipping and since there is a rating system, everyone must now tip otherwise risk getting low ratings which effectively makes NYC rides even more expensive than they had been.

Most people don't own cars in Manhattan so that they either have to take mass transit or use Uber/Lyft/Taxi. There are many elderly on fixed incomes that have trouble ambulating (moving around) where lower cost taxi service is important.

In NYC at least, Uber doesn't need all of that corporate overhead and perhaps they should spin it off into some low-overhead operation.

Tipping with rating basically equates to a shakedown. You have to now guess at the subjective price that the driver "feels" is deserved instead of what was agreed upon.

It's not like it was impossible to tip before. Now you just don't need to carry cash.

I don't use Uber myself, but doesn't the driver not find out what tip you gave them until after they've rated you?

On Lyft, the driver doesn't know that you tipped or how much. I fail to see why this would be any different.

It has been assumed that the rating system will be blind, meaning the drivers will not be able to see tips before leaving their rating. There is still the social pressure to leave a tip, but it likely will not be quite as rude as not tipping a traditional cab driver.

Can you elaborate on what you mean when you say, "It has been assumed that the rating system will be blind"...

- There is already a rating system for drivers, and riders, so this isn't a "will be" thing, right?

- The rating system is not currently blind, as far as I know. Certainly riders can see drivers rating, and I believe drivers can see riders rating as well.

Blind was not the best term to use. I meant the rating will have to be made by the driver before he can see the tip given by the passenger, so they cannot leave a lower rating because of what they deem to be not enough of a tip.

Ahh ok, that makes sense. Hopefully they will do it that way.

I'm guessing tipping is only available in NYC for Uber. I didn't see that option here in the Washington DC area.

I received an email from Uber yesterday. They're slowly rolling out the tipping service, starting in a few cities at first to test it out. It will eventually be everywhere.

Isn't part of the reason end users use Uber is for its ubiquity? If it was only available in a handful of cities that I won't be visiting, I wouldn't bother with it.

I mean, running a livery service in NYC is a fine business and there's no reason you couldn't make money at it. But it is certainly not the scale of ambition Uber was pitching.

If Uber was successful only in NYC, London, and Tokyo, someone would make the business work in every other city on earth.

Yes, but that would tell the investors to forget about any pay day justifying the valuation.

I travel a lot for work. Uber works in a lot of places where mass transit sucks and taxi service is nonexistent.

Even if they cost more I have no idea how I'm going to get around when I travel. The other options are so disgusting I'm not going back to that.

I would use them even if prices went up 30%.

To be profitable the prices would need to go up for more than 30% on average, because 30% only get's them to break even if you assume zero changes in ridership.

There are a few costs like background checks that may go down when they stop expanding, but fewer than you might think.

And I used uber or lyft to ride back and forth to work every single day because it's so cheap. ~9 bucks compared to a 3 dollar metro ride (and I typically save 20 minutes). If it's 15 dollars I'd ride less often and I'd probably try to hail a cab first.

Uber demand is definitely elastic.

Oh it's definitely elastic. I used to take Uber everywhere, until they (apparently) removed the restriction on driver's to use nice/current cars. Once drivers starting showing up in 10 year old beat down cars, my riding plummeted.

me too

> taxi companies have lower overhead because among other thing their drivers sometimes get hailed by people at street level

I don't understand why that would decrease overhead?

I also don't understand why the other aspects of overhead (dispatcher, offices, taxi lots) don't add up to more than Uber (whose only cost is servers and support)

Of course they can be profitable. Uber doesn't have overhead. There are no Uber factories or millions of rotting vehicles in a warehouse. At the core it is a iOS/Android app (4 guys could maintain this), a call center (India), and a law firm (outsource it). They would have to cut their staff, remove the ping pong tables and get real but profitability is there. They are on a land grab.

You really don't know what you're talking about. There's more to Uber than just an app. There is a large set of backend services responsible for everything from authorization to billing, promotions, logging, road directions, ETA forecasts, driver portals and so much more. I've never worked there but ventures like this tend to be very complicated with lots of moving pieces.

More than a team of four can manage certainly.

Maybe but this still seems like something that could be run out of one well maintained data center. Certainly fewer than 6,700 could manage it?

Scale, payment processing, and customer service all take manpower.

OK customer service I get, but why the first two? I mean yeah you'd need an IT staff obviously but certainly not that many.

Just dealing with the different laws about taxi services in different countries/cities itself would require a staff that size or more. And there's a lot more than that behind the scenes, like security checks on drivers, managers for each city to decide incentive plans for drivers etc. It's a very massive endeavour, and the size of the company is justified.

It takes a constant number of engineers to push a single feature, no matter the number of users.

It does not, however, take a constant number of engineers to maintain the infrastructure that lets a single engineer push a feature to millions of users. (P/I)AAS can help, but you still need people to monitor performance, find regressions and bugs, and track them down.

Call center in India ? But but but ... you guys said Indians are taking jobs away from the US. Why cant business be profitable with call center in the US itself. Greedy corps wants profits, outsource it and then innocent Indian employees gets the flak for it. Just wow !

it's also a massive recruiting and advertising campaign, since they have no product without hiring huge numbers of drivers

That's the point. Their technology costs are pennies per ride, revenues dollars per ride. They are only spewing cash trying to grow faster by buying more drivers in more countries. They could hire organically for much less.

They could hire organically for much less.

Uber only works if there are enough drivers so that I can always get a ride. If I get told that I have to wait 30 minutes for a ride more than a tiny handful of times I'm uninstalling the app. Growing organically in region would be very tough since it would take too long to get enough drivers in place that users could rely on the service and conversely drivers would be unwilling to sign up because not enough users where bothering to use the service.

Especially when there are competitors. Its what seemed to happen with Lyft in my area. A lot of people I know preferred using Lyft, because of the morally shady nature of Uber, but Lyft would take 15-20 minutes for a ride, and Uber would have one in 5. Pretty quickly everyone (myself included) just started checking Uber first.

Sure, which is why Uber has invested so much in driver acquisition in expanding it's territories. But once those territories are established they should be able to spend far less. If driver times start to become longer, it means existing drivers have a higher utilization and will make more money, drawing more drivers to drive for uber, and solving the problem in a virtuous circle.

> iOS/Android app (4 guys could maintain this)

Those 4 can handle everything backend related too?

> Uber's problem is taxi companies have lower overhead because among other thing their drivers sometimes get hailed by people at street level.

There is always demand for Uber/Lyft just because there isn't a taxi cab nearby 24/7. How is that difficult to understand?

> There is always demand for Uber/Lyft just because there isn't a taxi cab nearby 24/7.

There's certainly a market for app/phone jailable cabs because there isn't one within street hail range at all times, but regular cabs have been phone hailable forever (it's the only way to get one outside of a few major urban cores) and are increasingly app hailable. Aside from regulatory supply restrictions (flouting which may not be sustainable) there's no real basis for a market for alt-taxis as anything but interchangeable competitors supplying the same substitutable commodity as regular taxis.

>regular cabs have been phone hailable forever

For me, this wasn't particularly true, especially in San Francisco. The dispatch was unreliable and slow.

Other areas, sure!

Now that the idea of phone-trackable dispatch has become commonplace, regular taxi companies are starting to do this too.

> but regular cabs have been phone hailable forever

With Uber you also get know the fare upfront, the time of arrival, no need to tell them your address, there is a driver reputation filter, passenger insurance and it's safer than normal cabs in many countries.

Not the same thing as a phone call.

Well, Uber, Lyft, or some other livery service.

Uber doesn't make enough from fares to be profitable, they use investors' money to heavily subsidize them. Once the investor money runs out, Uber won't be able to pay drivers unless they jack up prices considerably. Once they are no longer price competitive, customers will move to other services.

Turns out the car service business isn't very sticky at all (even the drivers work for multiple companies...). Drivers start to leave and the downward spiral begins. They just couldn't get to self driving vehicles fast enough - which may be why they were trying to borrow technology from Google.

Come on, self driving cars was never a solution for Uber in the medium term. Cabs are in the midst of normal traffic, not even highway or anything. No way this will work good enough within the next 15 years

"Uber is a play on self-driving cars" is a misleading but often repeated story.

When Uber started and raised its first investment rounds, self-driving cars were too far away to be part of a business plan. I doubt the latest investors take that view either - spending billions per year until self-driving cars happen is a way too expensive way to build up a fickle user base who will switch the moment a competitor offers 10% lower rates.

And when self-driving cars do arrive, there is no reason to believe that Uber will have exclusive access to them. Google and other software companies will be licensing the technology to anyone who pays for it, car manufacturers will be selling cars to anyone who pays for it.

It may kill taxi driver as a career, but there is no defensible advantage to Uber compared to Lyft, Hailo, Taxify, and so on.

Yeah. The whole driverless car thing with Uber is such a load of crap. It wasn't even in the plan until they started hemoraging money and had to come up with some excuse to keep investors on board. And by that point they were late to the game.

Uber as a play on driverless cars is a smokescreen to distract people from the fact they have little advantage over other companies and can't for the life of them turn a profit.

> they have little advantage over other companies and can't for the life of them turn a profit.

At this point why doesn't Uber just lay off a HUGE portion of their staff and kill the R&D. It's hard to imagine if they downsized significantly and quit investing in self driving cars, that they couldn't tip the needle into profitability.

Isn't that a fairly common move for a startup? Burn money to get off the runway, then downsize to stabilize?

not in the medium term, but maybe some investment thought they were going to have it in the long term and now - given legal issues - nobody is going to think that.

Ha, nice use of "borrow".

> Once the investor money runs out

And when will that be exactly? This entire thread is overflowing with nothing but fantasies of Uber dying - basically raw emotional hatred - and little else.

Eight years on, they've never had a serious problem with raising capital and there's no evidence to suggest they'll struggle to do so now. The absolute last problem that Uber has right now, is money.

>"This entire thread is overflowing with nothing but fantasies of Uber dying - basically raw emotional hatred - and little else."

Except that there are no shortage of people who have maintained this view long before Uber's CEO was asked to resign and before Susan Fowler's blog post. Also there are also plenty of people who have commented here that believe Uber's prospect without Travis Kalanick as CEO are not good and also believe he should not have been removed.

>"Eight years on, they've never had a serious problem with raising capital and there's no evidence to suggest they'll struggle to do so now."

You might want to look up the term "irrational exuberance":


Uber has been a fantastic means to lose billions, so far. It's not clear that they have a way to profitability. Are you going to invest in them? Do you trust their numbers? If so you might want to explain why.

"no longer price competitive" to who?

"drivers start to leave" where are they leaving to?

Borrow or steal, it is all the same, until the courts rule otherwise...

Anecdotally, I've personally taken Lyft almost exclusively lately. Among my peers, I've noticed similar trends. I've even heard shifting in language -- rather than say "call an Uber", I've heard "call a Lyft"., Plural of anecdote is obviously not data, but those are my data points.

This conversation was had in a thread a week or two ago. The consensus was that the Lyft or other alternative anecdotes are far and few between. Like saying call a Lyft has to be rare and probably just in certain small circle. Most people are on Uber.

The thread link is: https://news.ycombinator.com/item?id=14456973

We've made the shift in NYC to Lyft or JUNO.

Not even sure if I installed Uber last month when I got a new iPhone.

Same. Juno in NYC, RideAustin in Austin, and Lyft everywhere else if there's not another local(ish) tnc

My data points are that I've been taking Uber exclusively, because Lyft can't seem to figure out how to operate outside of the US. :-)

The reason it's so big is they're burning VC cash to subsidize rides.

So yea when billionaires are paying your taxi fair to try and drive the local taxi firms out of business naturally they're everywhere.

But when that cash runs out the necessary price hike could just as easily drive them out of business. It's not like the drivers have any great loyalty.

We really need pro-competition legislation to stop this sort of predatory capitalism.

People keep saying Uber is burning cash, but their core business model is sound:

$5 per hour per driver goes to Uber

Assume 80,000 drivers (half of # U.S. Uber drivers) drive 8 hours a day, 7 days a week

52 weeks in a year


So about $1.1 billion just in the US. The only expenses are at headquarters (engineering, operations, design, legal, marketing, support) and the tiny field support offices they have in each city (local, entry-level employees).

As far as I know, Uber loses money on driver incentives and stuff like pool/share options, where they pay the driver the amount over the discount granted to the customer. I'm assuming a lot of such tricks are how they keep their drivers, and this is what they spend money on.

billionairs can get burned too

Yes, but the ill effects are wildly out of proportion.

> We really need pro-competition legislation to stop this sort of predatory capitalism.

That's a non-sequitur

>"We really need pro-competition legislation to stop this sort of predatory capitalism."

This conclusion refers to the idea of VCs(billionaires) subsidizing rides in order to remove the entrenched player(taxis.) How is that a non-sequitur?

It sounds like the parent poster is saying that "pro-competition legislation" would prevent a new company (funded by VCs) from competing with an entrenched industry (taxis).

I think the confusion stems from saying pro-competition legislation will prevent competition.

What's bad about VC billionaires giving cheap rides to other people?

It wasn't my comment. I was just commenting on it not being a non-sequitur.

If the unit economics don't stack up, then the bigger it is, the faster it'll go out of business without external investment. Pervasiveness doesn't mean it's profitable, it means it's popular. If I had a network of people giving away $1 for $0.90 it'd be super popular.

As it is, Uber doesn't need to do too much to hit break even. Some central costs cut, and a slight rise on price.

I agree, but investors don't want to break even. The fundamental tension here is high operating margins -- 60% not being uncommon operating margins for a software company -- are incompatible with a highly competitive industry. But it's those fat margins that justify massive R&D investment. Although software companies have enormous operating margins, they generally are not more profitable, because of huge fixed investment.

That creates a bit of a puzzle for industries with very thin operating margins that want to make significant investments in R&D. Generally they don't do it. That is why innovation at the Grocery store or in Long Haul trucking is so slow. From an engineering point of view, they are ripe for disruption, until you bring in an accountant to tell you that the disruption doesn't pencil out. Uber, like everything else, said to hell with it we're going ahead anyway. So how can they make things pencil out?

One option is to raise unit revenue in the future, which in an industry that's currently competitive means driving out the competition. IMO Uber was originally targeting this. But it turns out -- and really anyone could have told you -- that what Uber is doing isn't technically difficult. The heavy lifting is smartphones, GPS and Maps, whose availability made Uber/Lyft possible. Uber doesn't own any of the key technologies that make Uber possible, nor do they have a track record of being able to tackle really hard technology problems. They've had huge problems scaling and when Uber started using its own maps, it was a disaster. Bad maps is the #1 problem with Uber. Lots of new competitors have sprung up already that give basically an equivalent user experience, so Uber is not going to get real pricing power.

The next option would be "Lower unit costs in the future", But so far, that means spinning tales about self-driving cars, which is way beyond their technical ability as well as decades out even for those that have the chops to pull it off. IMO this only works because the latter round investors are naive about technology and the current investment climate is conducive to reaching for yield.

So while it's perfectly possible for Uber to continue existing as a concern, I don't think it's possible to satisfy their investors, and this means, unfortunately, that Uber may not make it. Many companies engage in a lot of self-destructive acts to meet unrealistic profit or growth goals set by investors, but in this case, Uber has only themselves to blame for setting these expectations. This is a shame, because I prefer Uber to Lyft and think they've created enormous value for both riders and drivers.

There is nothing that differentiates Uber from lyft, or another ride hail company. Drivers could easily switch between the companies. Driverless tech will be the differentiation. Whoever gets there first, even in limited urban centers will win the taxi industry

> Whoever gets there first, even in limited urban centers will win the taxi industry

Why "win"? There's no moat. I suppose there will be patents, but those expire or can be worked around.

More likely is that whoever gets there first will make all the mistakes that others can learn from. Every major car company has a self-drive effort now. Apparently Tesla, GM, Ford, and BMW are pretty far along. Lyft has a few partnerships here. It's only a matter of time before most cars drive themselves to some degree.

yeah expiring patents, and effective partnerships, give enough cushion for one company to get far ahead enough to dominate the business.

self driving hardware+software is much more complex than just writing some software... a non player can't trivially get into the game just because someone else have higher advancement

Competitors won't have to develop this stuff on their own. They just need to buy a self driving car that has an API. Trying to vertical integrate the self driving software is a moonshot.

guarantee you that for the initial years, self driving car will take the form of proprietary units, used for specific purpose, in isolated locations. Akin to self driving rail transportation.

No mass produced self driving appliances that any dumb human can use improperly. The industry won't take that chance of a poor impression and destroy public's confidence all together.

In urban/high density locations, a ride hail company leveraging driverless vehicles can make a killing.

I think you meant "exclusive" partnerships, similar to how the iPhone was exclusive to the at&t network on launch and for a few years thereafter.

It's a relished fantasy that Uber is dying or is going to die, because so many people in tech circles hate Uber and Kalanick.

It's not actually dying and it's not going to die.

Routinely skeptics here will point out that Uber is selling a $1 service for $0.75 (or a similar invented sum). Said skeptics then intentionally, comically ignore that Lyft is and has been doing the exact same thing and has radically less capital & valuation to play that game with. The name of the game is: last company standing; that's going to be Uber because they can afford to be and Lyft can't. It's that simple.

Lyft seems to be a fundamentally different company in two ways that gives them an advantage over Uber. First of all they are much happier to partner with local players and don't feel a need to 'own' the entire world in the way Uber does. Secondly Lyft seems happy being a ride dispatching service and don't see it as a temporary stepping stone towards much grander transportation ambitions.

The downside of this approach is that Lyft doesn't have anywhere near the upside potential that Uber has. If Uber pulls off all of its ambitions it will be larger than Lyft could ever dream of being. The upside for Lyft's more humble goals is that it's chance of reaching them are much larger.

Unless Uber is willing to change its DNA and scale back its ambition, give up on its long term goals, and stay just a basic ride dispatching service then your analysis is incomplete. However perhaps this scaling back is what the CEO change is fundamentally about.

Regardless of what you're saying, Lyft lost $600M on $700M in revenue in 2016. Those numbers are awful. And worse than Uber. Lyft isn't in any better shape than Uber in terms of needing more funding almost every year to sustain the company.

True. However I personally don't think either company can do too much about revenues at this point and it's all about controlling costs. From an outsider point of view it seems that Lyft is in a better position, culturally if nothing else, to do this. At least when compared to a Kalanick run Uber. It will be very interesting to see what priorities the next CEO will have.

Internal culture or external? The vast majority of people have little idea of Uber's issues and if they do have some idea, they don't care. I'm not saying that's how everyone is. Just most people. Especially outside of circles like HN.

If internal, I gusss that's true. But we don't hear much about Lyft's internal workings. We don't know the morale of workers or how productive the company is.

About controlling costs - that's why I mentioned losses. Lyft is only in the US yet its losses are worse than Uber. It makes Lyft looks worse to me. Has Lyft said it is profitable anywhere or even break even?

But then Uber's insane valuation is not helping itself. I guess both companies are in bad positions, hard to say which is worse. And I agree it will be interesting to see how Uber does over the next year with new top executives.

By culture I meant how they think internally about growth vs profitability. Uber under Kalanick feels like they wanted to dominate every market or die trying and Kalanick didn't strike me as the sort of person who would be happy running fairly successful company making modest profits. Lyft however seems like they'd be content with being number 2 as long as they're profitable. This is of course pure conjecture on my part.

Has Lyft said it is profitable anywhere or even break even?

The CEO said in a recent Forbes interview that their losses are currently coming in "under budget" and that they have a definite path to profitability. Make of that what you will.

I've seen Lyft saying those sorts of things for some time now when I skimmed around while replying to you. It seems like Lyft has been saying this sort of thing since around 2015/2016. For now I don't believe them. But I'll take that back if they do show what the CEO said when financial info is revealed for this year.

And yeah agree with Kalanick and Uber by extension seem to be only content with winning everything. They only gave up on China after spending a ton of money and clearly not being able to win. Luckily they were able to get a decent stake in Didi from the merger and leaving China.

> The vast majority of people have little idea of Uber's issues and if they do have some idea, they don't care. I'm not saying that's how everyone is. Just most people. Especially outside of circles like HN.

The drivers certainly care.

Agreed, but they'll get more funding. the big thing is, keep the support of your constituents and you'll keep getting funding.

Travis offended and insulted the drivers, while Lyft is chugging along quietly. As long as people have brand loyalty to them (which they sure do), they'll win the ridesharing battle as it's looking like Uber is teetering

> Secondly Lyft seems happy being a ride dispatching service and don't see it as a temporary stepping stone towards much grander transportation ambitions.

Yeah... that's why they have so much investment from car companies... ;-)

> Said skeptics then intentionally, comically ignore that Lyft is and has been doing the exact same thing and has radically less capital & valuation to play that game with.

I'm blown away that you have to read more than half way down all the comments to get to this observation. It should be an automatic reply every time someone echoes the fantasy that Uber runs out of money and Lyft is magically left to take over. I don't understand the mental gymnastics and contortions one needs to make to arrive at this absurd idea.

Correct, if Lyft and Uber IPO tomorrow. Most of these people are going to put money on Uber. Lyft is a lifestyle business its. Uber is a public utility.

> Lyft is a lifestyle business its.

Not sure what "its" is, but characterizing Lyft as a lifestyle business seems absurd. It's not as highly leveraged s Uber is, but that's one of the few companies I can think of that one might consider more aggressive.

Public utility? That's funny.

> going bankrupt and shutting down?

Well, if you're spending more than your revenue, that is the eventual outcome if money stream from investors dries up.

Uber doesn't really have many physical assets that could be liquidated. Their value is entirely based on profitability. Which is currently negative.

The drivers don't suddenly cease to exist when Uber shuts down.

You don't have a company yet if you're dependent on future investment.

This is an unpopular sentiment around here, but needs to be said more. You're still a child playing with other people's money until you're actually self sufficient.

In some cases this lack of maturity is particularly striking.

Eh, I think that's taking it a bit too far.

I think it's far to say you don't have a sustainable business model yet if you're dependent on future investment.

Yes yes, clearly there are points in time where there is a real entity that exists as a company. But in the context of "can I lose all this?" where you are a founder building something, you don't just not have control, you don't have anything when you are dependent on future investment.

I would argue that _every_ company needs to be worried about the question "can I lose all this?"

Even a company that is fully owned, with a sustainable and profitable business model, needs to ask the question "can I lose all this?" every day.

If the metric for "you don't have a real company" is you could potentially lose it, then nobody has a real company.

Given K ruthless record I'd say he bailed before the crack more than stepped down to see it flourish.

Would wait to see what'll happen to his equity before take a bet, but gonna guess will be sold high and eventually rebought after the crack when K will try to step back in at a better condition, with less stakes and more hard cash.

If the existing investors refused to play ball, they could kill the next round, which really would kill Uber.

If there's a next round, it will probably involve a big haircut for the early-stage investors.

I think you mean a big haircut for the later stage investors. Even if Uber has a down round, the earliest investors will probably still have positive returns (at least on paper).

> Even if Uber has a down round, the earliest investors will probably still have positive returns

No, they could be crammed out by later investors' liquidation preferences. Depends on how down the down is.

You are confusing a down round with a small exit event (here and in other places in this thread). Liquidation preferences don't come into effect until a sale of the company - so no one is "crammed out" by them in a down round.

Though these two types of events are obviously correlated (a down round makes a smaller exit more likely) they are not the same and should not be confused. A financing at a valuation that is a billion dollars less than the last round would be a down round, but a sale of the company at that same valuation would still far exceed the liquidation overhang.

Haircut does not imply that they will have negative returns. It could mean that instead of a 50x ROI, they end up with a 5x ROI.

How much interest does he actually control right now?

“He who can destroy a thing has the real control of it.”

Dune, Frank Herbert

"The machines themselves condition the users to employ each other the way they employ machines."

- God Emperor of Dune, Frank Herbert (a prescient book on social feedback loops, my favourite in the series)

> Our main way of relating ourselves to others is like things relate themselves to things on the market. We want to exchange our own personality, or as one says sometimes, our "personality package", for something.

-- Erich Fromm ( https://www.youtube.com/watch?v=Cu-7UDT0Xe4&t=1m34s )

> The danger of computers becoming like humans is not as great as the danger of humans becoming like computers.

-- Konrad Zuse

And when Picasso said that computers are useless because they only provide answers, was he just being witty, or pointing at an abyss, knowingly or not?

Ironically applies to both Kalanick & the investors!

Any of us could inflict real damage or destruction on our surroundings especially while driving but that doesn't mean we have "control" over them.

Insofar none of us would want to suffer the consequences of such acts we cannot truly say we are capable of carrying them out.

It is what we mean when we claim someone is "incapable of <x>" such as murder. It does not mean they do not physically possess the means, but rather that they lack the psychological impetus to do so.

So a person who is psychologically capable of murdering has more control over me than one who isn't, and both are less in control than, say, a tsunami? Maybe, but neither can get at things I give freely to a friend? Control is the incapability of either friendship or self-defense, in my opinion, so yes, in a way always it requires numbing or killing something or someone. Leashes transform those on both ends.

"So a person who is psychologically capable of murdering has more control over me than one who isn't,"

More relevantly, a person who is both capable and willing to restrict your freedoms, potentially even unto death, has more control over you than a person who doesn't.

This isn't abstract theory. This is a description of "government". Would you pay any attention to the people claiming to be "the government" if they didn't have credible mechanisms for backing up their demands?

It is preferable that government not be solely founded on this power relation. It shouldn't be considered "sufficient" for good government. But it is certainly "necessary".

Relevant wikipedia article on the subject:


It's why "non-coercive government" is an oxymoron.

Note: downvotes are not a rebuttal. Not that I think that it's possible to dispute that statement by means other than "I'd like the world to work differently", but if someone were prepared to offer an argument, that would redound far more to their credit. And if you think I'm wrong, don't let me dangle in ignorance, otherwise I'm liable to keep saying such things.

The original quote does fall apart, as most quotes do, upon closer inspection.

Say you can kill a man, but irregardless of the threat to their life said man would refuse any and all of your orders, who can then be said to have 'control'?

In the end control means the ability to influence outcomes. There are many metrics, and for some choice of metric the capability of destruction is control.

The original Dune quote makes perfect sense in context. Paul was talking about destroying the spice supply by making Arrakis barren of sandworms. "Control" in this context is control of the spice, specifically being able to control there being none at all.

He's "Amazon profitable", Uber has profits if you neglict investments for market dominance.

The investors would have had to pay up given size of previous investments. The VCs just timed it "well" with Traviss personal tragedy. /smh

They could smell the liquidity ...

Are you implying he's being strong armed into selling some of his shares?

That's insanity. Why would existing investors refuse to play ball? They're basically locked into it. Uber's massive valuation is built on its potential and to anything they do that hurts Uber's access to capital hurts them.

I think they made a huge mistake in pushing Kalanick out, but I'm an outsider. There is surely something dark at play here, that we don't know about.

Liquidation preferences, senior equity, and debt-like terms, perhaps? If Uber is valuable enough in liquidation, it'd be a great opportunity to zero out the common stockholders and go home with a pile of cash.

you are absolutely right depending on liquidation preferences terms cascade it could be a great deal to force an IPO or another type of exit for later investors.

> Uber has less than a year of runway left at their current burn rate.

If true, this seems far more likely to be a cause of Uber's death than Kalanick resigning. That, and the valuation being as insane as it is, which is also Kalanick's fault, which as you point out, makes it hard to find greater and greater suckers.

Perhaps they'll be better off all around without Kalanick, assuming they can get the business side on track and get the burn rate under control, and perhaps make their business sustainable rather than a gigantic handout of VC money.

Uber bought market share by subsidizing rides. That can't go on forever. Or much longer, without more capital. They're already borrowing heavily, having run out of equity sources. The business model hype is supposed to be that they push taxis out of business, then raise rates. Or self-driving cars will somehow save them. Both are unlikely.

[1] http://knowledge.wharton.upenn.edu/article/growth-vs-profits...

Completely ridiculous. The model was not to raise rates in the future. The whole reason they could raise so much money was that they showed as they reduced rates, they induced more demand. They also had data showing increasing lifetime customer value. I recommend reading Brad Stone's The Upstarts. If they can have higher profits/customer while having lower rates than other companies, then they actually have a moat. I don't think they got to the moat, though.

> they showed as they reduced rates, they induced more demand.

Also known as losing money on every ride but making it up in volume.

If you have costs that scale sublinearly with volume, such as software development or idle driver time, then margins really do improve with volume. Many successful businesses use economies of scale as an sustainable competitive advantage against competitors.

In fact, the central concept of venture capital is premised on the idea that businesses start out unprofitable but become profitable as volumes scale.

To what extent any of this is the case for Uber is worth debating. So feel free to have that debate, and bring forth new information or new arguments that support your thesis.

> If you have costs that scale sublinearly with volume, such as software development or idle driver time, then margins really do improve with volume

And if you're subsidising rides below cost because you're trying to grow your market and you have piles of VC cash so you don't care that you're burning through money, then eventually you're going to run out of that money and will be in trouble if you can't raise any more.

Time will tell whether Uber was building a sustainable business or just burning through VC cash.

Uber was just burning through VC cash based on the idea that 'if you're the biggest jerk on the block in every possible sense, capital will decide you're going to be the winner because you're meaner than everybody else'.

Winners don't quit, so Uber is dead to capital now: it was always based on maximum evilness and all the stuff about disrupting and ridesharing was mere window dressing.

Note to capital, wherever it is: this is what you get when you go by personality rather than studying the fundamentals of a business. You can't simply pick the most toxic individual or company, claim they're going to kill everybody else, and then prop them up with valuation. The valuation didn't fail but your pet Dr. Evil did, and that was your proxy for maintaining the 'killer' behavior. Unless or until capital can be personified as evil AIs that cannot die, this was never really an optimal strategy for capital.

Considering that Lyft is viewed as the "nicer" company, do you think its fundamentals are more sound? Will it reach profitability?

Here is what Uber has built, save your car EMI's.

When you're #1 and losing money on every transaction, that didn't work.

Only if you are in #1 in a pie that isn't getting bigger. Ridesharing is most definitely not a developed market globally. There is a lot of room to increase the size of the pie.

Ridesharing is definitely not a developed market globally because in most of the rest of the world the margins on organising transport around cities are already measured in cents rather than dollars. These markets are not going to be more profitable for Uber than the ones they started in.

Particularly not if you can't set up an operation in an Western city with expensive taxi services without losing money on every ride you operate even before centralised overheads are taken into account.

Is there evidence that Uber is has negative gross margins in developed Western cities? (Not a rhetorical question - I'm open-minded and very curious.)

From their 2015 financials, it looks like revenues have been consistently higher than cost of sales.

Source: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

Is there evidence that Uber loses money on every transaction?

According to financials from 2015, they have higher revenues than cost of sales:


This suggests to me that marginal rides are profitable, even if they aren't profitable enough to cover fixed costs of software development or investments into new geographic markets.

When you're giving drivers more cash than the customer is paying you, there's no way to 'scale' out of that.

Is there evidence that this is the case? And if so, could you share it?

From their 2015 financials, it looks like revenues have been consistently higher than cost of sales.

Source: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

Granted, it was only promos in certain cities to drive growth of both drivers and riders.

Quick Forbes link I found https://www.forbes.com/sites/ellenhuet/2014/07/02/ubers-newe...

Thanks for the source and the reply. It's good to know that in 2014 they had promos in developed city markets that dropped their gross margins into negative territory.

Nonetheless, my impression is that this is more the exception than the rule, based on the financials I linked to earlier.

But not Uber.

If you're losing money on every ride, then your aggregate profit on all rides will be in the negatives. More volume just makes the total loss bigger, because that's more money you've been giving away.

That's the point, it's an ironic phrase.

But are they losing money on every ride? I thought the whole point of subsidizing rides was(as OP comments pointed out) to raise demand, both for drivers and riders, they first entice both ways with the promise of lower rates and higher payoffs, then slowly increase their cut of the pie against the driver's payoff and increase the rates on riders.

I'm not saying this will ever offset their increasing losses, but that is what always seemed the long term goal of monopoly.


> I thought the whole point of subsidizing rides was(as OP comments pointed out) to raise demand, both for drivers and riders, they first entice both ways with the promise of lower rates and higher payoffs, then slowly increase their cut of the pie against the driver's payoff and increase the rates on riders.

Right, and by the logic that decreasing prices raises demand, increasing prices will decrease demand.

That's my point, and the point of critics that are often ignored. Their customers will bail the moment they start getting charged the $25 their $10 ride actually costs. And that increase will be to break even. Not make any money. Just break even.

Uber will never achieve a monopoly. There are buses, bicycles, and used cars for $1500. People aren't going to pay $600 per month on a ride hailing service. I've already ditched Uber, and so have many of my peers, in favor of alternatives that save money. And that's without significant price hikes yet.

The fundamental economics of having a private driver have not changed. An app doesn't change what it costs to pay someone to drive you everywhere. I hate being critical because it's often a waste of time, but Uber is sincerely one of the worst investments that Silicon Valley has ever produced.

> More volume just makes the total loss bigger, because that's more money you've been giving away.

Yup, that sounds about right.

> The whole reason they could raise so much money was that they showed as they reduced rates, they induced more demand

This is true for almost any good.

> Completely ridiculous. The model was not to raise rates in the future.

I'm not sure if you're disputing OP's idea that Uber subsidizing rides is (at least in part) of an effort to kill the taxi industry, but my logic is, if you don't have any competition, why wouldn't you raise rates?

One possibility, because increased rates could result in your user base using your service less often?

While transportation is something everyone needs, I'm (as priviledged as I am in my salary) not going to pay $20 for an uber if it's $2 on the bus.

I'll take uber when it's $10, compared to $2.

They could possibly raise their rates some, but to answer your question specifically: because there are other factors involved in their price/demand/profit/market share equation, besides just competition.

You're exactly right though, and that's the problem.

People won't pay to use the service if Uber charges what it actually costs to deliver it. They're heavily subsidizing each ride. When you pay for an Uber, they're basically giving investor money to the driver to cover your fare for you. Investors have been paying for your transportation over the past few years.

At some point, they have to actually make money, and the only way to do that is to raise prices. The issue is no one will stick with the app at higher prices. I've already abandoned Uber/Lyft/others for a $300 bike and a bus pass, because it's much cheaper and much healthier. If they double or triple their prices, which is about what they'd have to do just to break even, lots of people will be following suit.

The self-driving car game was supposed to save them, but I don't think they're guaranteed to win that fight. Tesla seems further along than anyone, and I have far more faith in Musk's ability and track record of executing than I do in Travis (or whatever committee is replacing him). Not to mention every automaker is working on self-driving cars right now to boot.

Uber has no guarantee they'll dominate that market, and considering they can't even break even in their current market, I see them as a ticking time bomb.

>The self-driving car game was supposed to save them, but I don't think they're guaranteed to win that fight

Agreed. I'd argue that existing car-sharing companies like Car2Go are better positioned to dominate the "self-driving taxi" market. They've already solved the challenges of owning and maintaining a shared car fleet profitably. The day self-driving technology is ready, they'll already be miles ahead of Uber.

You got green name, so I'm gonna reply here too. You already pay for the bus, does not matter if you use it or not (okay there's a surcharge, cause we ain't no commies). Uber has to compete with that! If you thought VC's are good at throwing away capital...

edit: I forgot what green name means... green btw...

> edit: I forgot what green name means... green btw...

Newly created HN accounts are colored green so members can recalibrate before responding to troll-like contributions from new accounts (I think).

The bus does not cost you $2 (generally, in the USA, you voted for it) fare != cost

I think we need more of it though...

> The whole reason they could raise so much money was that they showed as they reduced rates, they induced more demand.

I've yet to see an Uber driver who started rolling in cash after the rates were dropped. 100% of my anecdotal conversations (and that's not 99.9% rounded up, but a straight up 100%) reminisce about the good ole days.

Rider demand, not driver supply. There is plenty of driver supply in most cities.

They don't have any kind of advantage apart from being first mover in the states so no guarantee they will take all the market share in the short term and in the long term if and when AI driven cars come they will be out muscled by car manufacturers who can put millions of cars on the road in a year when they go all in.

They do. They have huge mind share, they are in more locations, and they offer a better service than Taxi's already.

If I'm not mistaken, they were losing money on every ride. If they did not intend to raise the rates in the future, they're basically planning to go bankrupt.

And I have a really hard time believing companies plan to fail.

It's a very clear case of dumping, or whatever it's called in English. Unsustainable low prices, suffocate your competitors, raise prices.

At some point, though, every company that wants a sustainable business model needs to make money "on average" on the sum of all items (units of service, e.g. rides) sold. Uber being a local business should be able to do this progressively as its business matures in each city. However, if it is true that they are not profitable in their mature US market where by some accounts they enjoy >80% market share, that implies some substantial flaws in their model. Subsidizing rides in Asia or some smaller city in Europe is ok to gain growth, subsidizing rides in New York or San Francisco is worrying. And autonomous driving implies a completely different business model and economics (driven by the "who owns the car fleet" discussion).

That was never going to work. With self-driving cars on the horizon they will soon be forgotten about as car manufacturers start rolling out their own apps. The switching cost is too low. If Uber thought they could rely on brand recognition to dominate the market it's because they misjudged what market they were in and who the players were. Regardless of what Uber could do in the next 10 years Mercedes and BMW will still be more recognisable names and as soon as they roll out their self driving fleets and ride hailing apps Uber are history. No one will buy Uber if they can build the same thing for what is, in the grand scheme, essentially free.

That is exactly my point for a while now [1]. The investors could have easily picked on taxi company handed them several billions, but they chose Uber. Mainly because of the hype created by the senior leadership team. They seem to have overplayed there hand.


"Uber is an example of what happens when central banks attempt to ‘stimulate’ the economy through misguided central planning. By forcing down market prices and essentially moving spending from the future into the present, they’re hoping to stimulate investment in general. But what they forget (or more likely, choose to ignore) is that these ‘investments’ are likely just bad investments."

Such a great quote

There's a likelihood to increase economy's output with spending though. If that's the goal then it's a good measure.

I agree with the general dynamic there, but the connection to Uber specifically is tenuous. Risk free interest rates of 0.1 vs 0.5% don't lead VCs to be more or less aggressive with creating and capturing new markets.

very late stage investors are more sensible to interrest rates.

> Uber bought market share by subsidizing rides.

Sounds like a '90s startup. Companies acting like this en masse was what caused the 2000 crash. Uber isn't going to make it out of this alive, and they're going to take the rest of the industry with them. I think the whole culture of VCs looking for "unicorn startups" is going to go away when the unicorns all die.

It is working about as well as the Saudi plan to tank oil prices to push indy frackers out of business.

But that's nothing new, Uber has been on that shaky ground for months now. "If Kalanick can turn this around" (and his banking on automated to make them viable) were basically the only hail marys the diehard bulls clung to. (Name recognition/network effect being useless for obvious reasons that've been covered here in the past) with this, all their eggs are in automated.

For an embattled company like this in a fiercely competitive industry, you need committed leadership and not a rotating cast of hired guns looking to make a quick buck.

Kalanick has serious issues but he's demonstrated unquestionably forceful (and polarizing) leadership that mere "managers" will never be able to replace.

I've been bullish on Uber despite all their mistakes and internal issues because at the end of the day, the guy at the top was irrationally emotionally committed to _winning_. Now I am a bear on Uber.

Please don't further this narrative that sexually harassing women and his general brohaviour are good for business.

They are not. There are ways in which being an asshole ay be good for founders (cf Steve Jobs). Kalanick is just an asshole, and even take-no-prisoner ask-forgiveness-later businesses run much better with a bit of attention to human decency.

> even take-no-prisoner ask-forgiveness-later businesses run much better with a bit of attention to human decency

I'm sort of baffled by seeing someone say this in a comment that's supportive of Steve Jobs. Are there tons of "the human decency of Steve Jobs" stories I've missed? Because I would have said that I've never heard of Jobs showing even a scrap of that, and it worked out pretty well for him.

The things happening under Jobs were different than the things happening under Kalanick, sure. But I don't see where that's a function of anything like decency - it just looks like a cultural difference in what kind of inhumane hostility was happening. Jobs was a perfectionist, but he was also manipulative, cruel, and dishonest in ways totally distinct from that.

People like Steve Jobs weren't successful because they were assholes, they were successful in spite of it. Being manipulative, cruel, and dishonest do not help your business in the long run.

Yes, I agree. But the comment I was replying to seemed to suggest that somehow Kalanick is an asshole in a business-damaging way, while Jobs was an asshole in a necessary, visionary way. It's an idea that's some combination of cultural animus and the Jobs cult of personality - neither of them benefitted from being unpleasant.

You're right. However, the many other worse things Uber did than that sexual harassment case actualy do seem to be good for business - that's why for many years now I was hoping the governments will kill Uber. Unfortunately that did not happen, and it is this fact - not some narrative - that is dangerous, because there will be others willing to try out the "move fast and break laws" business model.

has Kalanick himself ever harassed women? I'm genuinely asking, I haven't followed the Uber story closely but I thought the harassment accusations weren't aimed at the CEO.

I don't think anyone's suggesting that sexually harassing women is good for business.

When another executive (probably illegally) obtained medical records of a woman who was raped by a driver in India, Travis viewed the records and repeatedly aired his belief internally that the whole thing was a setup by a rival company and no rape had occurred.


This is not sexual harassment.

Agreed, much more in the asshole (this is a good thing?) category.

There are some stories documenting what seems to be a somewhat strange relationship to women, but that's not quite the point. He has, and this seems to be almost undisputed at this point, certainly let far too many serious incidents including sexual harassment and assault go by without taking action.

I've commented all over this thread (as a sister comment points out) because it appears there is a narrative that his attitude towards his employees misbehaviour is at least closely linked to the personality traits that allowed him to be successful. That can be seen, I believe, by the many comparisons to Steve Jobs, for whom it's accepted more widely that it was often hard to work for him because of his perfectionism, but that this was a necessary trait for his success.

The danger here is that people (mis)understand the situation and start excusing inexcusable behaviour, or even imitate it, because they think it's linked to success. It is not. You have to separate the strip-club-going bravado from the other law-breaking, which could at least in theory explain Uber's success.

> it was often hard to work for him because of his perfectionism

Honestly, this feels like a white-wash. Jobs was exceedingly demanding, but that's hardly unique. Jobs was also dishonest, secretive, and simply cruel to the people around him. This comes up over and over, even in his non-business interactions.

I agree that it's an error to lionize Kalanick's behavior. But it's also wrong to say that Jobs' behavior was radically different, or that Kalanick's party-boy bravado is clearly separable from his disregard for the law. Realistically, I think we'd be better off admitting that an urge to ignore boundaries usually applies across many topics.

If Jobs was more capable Kalanick, I don't think that was a function of his nastiness somehow being more noble. He seems to have simply brought a lot more skill to his task.

I don't think he has been accused of doing it personally.

It also is weird that matt4077 repeatedly contrasts Kalanick with Steve Jobs in this thread, despite Apple having been accused many times of mean culture, sexism, harassment and cover-ups too.

No, he oversaw the harassment and managed HR's nonresponse to it.

Like any good late-stage US capitalist, he outsourced it.

> he oversaw the harassment

so he was standing over watching with approval as his employees were accosted? I doubt it. I think what's more likely is he didn't know about the extent of harassment (or didn't care, if you want to be cynical) and the initial HR non-response was likely just a really poor quality HR department designed to manage PR rather than solve employee problems. Organisations are more than just their CEO and while you can lay plenty of blame on him for allowing such a poor quality workplace culture to evolve, that doesn't necessarily mean that he's a big fan of sexual harassment in the workplace.

> I doubt it.

I bet you do, because nobody in their right mind believes that, and you are obviously attempting to cast the notion that a CEO might know what happens in their company as absurd.

Or do you also think that others believe oversight committees on BoDs literally stand over the managers and nod or grimace?

If he didn't know what HR was up to, he was incompetent.

> that doesn't necessarily mean that he's a big fan of sexual harassment

And... exactly nobody I've read here or anywhere else has asserted that. If you want to argue, do so in good faith.

I don't think a CEO knows what happens in such a large company at the level of individual employees.

If he didn't know what HR was up to, perhaps he wasn't the director in charge of HR? You can't expect a CEO to know 100% of what's happening in a larger company.

> And... exactly nobody I've read here or anywhere else has asserted that. If you want to argue, do so in good faith.

> ... managed HR's nonresponse to it.

your quote seems to imply that he went out of his way to make sure HR did nothing about the harassment. I'd be inclined to argue incompetence (or just a lack of ground-level micromanagement) over malice.

This seems like a pretty fruitless discussion. I have no idea why you're so focused on finding claims of malice to argue about. I certainly have said nothing about it. I don't know what's in dude's heart, and frankly don't care. This is about observed behavior.

Unless the facts on the ground are very different than what we've heard, Uber HR had a policy of protecting some people accused of harassment because they were highly valued. In other words, a decision somewhere was made that policy was to prefer key-player retention over the risk of lawsuits, because, obviously, that sort of policy is pretty much guaranteed to lead to lawsuits[1].

I have a great deal of difficulty imagining the HR exec who doesn't realize that - that would be beyond incompetent, well in to senility[2]. I also have difficulty imagining the HR exec who will personally take on the risk of mandating policy about balancing disparate business risks (slowing down by losing productive harassers vs. lawsuits and bad press). That can end careers, and anyone capable of landing a management job at an Uber is exceedingly unlikely to take that risk without taking it up the food chain.

Finally, I find it remarkable that so many people are willing to credit the man with extraordinary genius in business execution while simultaneously arguing his incompetence when it happens to absolve him of shitty behavior.

And with this, I'm done with discussing things I didn't say.

[1] Moving on to speculation, making that choice makes perfect sense in an environment with a value system emphasizing winning at any cost and burning down anything in the way. If they thought first-mover advantage was literally everything and they thought they had enough money to weather any resulting legal problems, that's the rational choice. And especially if you think you're the smartest guy in the room and can get away with it. Not unlike hypothetically deciding to gaslight regulators or steal IP from competitors or invade medical privacy to discredit opponents. For example.

[2] I don't know about other states, but in California, HR for firms over some number of employees are legally required to ensure employees have been trained on sexual harassment law. I'm sure it takes other forms, but generally we get to watch these awful law-firm Flash videos of cartoons being either awkward with or awful to each other, and then have to answer questions about which actions are harassment in order to make sure we paid attention.

> sexually harassing women and his general brohaviour are good for business

Nowhere has he said this. You're conflating two very different issues. No one is disputing that he is an asshole, etc. OP was making a different point.

But does winning have to come at the cost of basic human dignity and law?

It probably doesn't have to come at that cost, it's just not unusual for it to.

If you peal back the layers, probably most rapid growth, hard driving large companies have left a wake of upset and screwed over people behind it. Nobody "gives" you a hundred billion dollar company.. Uber's leadership was just particularly inept at pivoting from "scorched earth" to a slightly less savage strategy.

This will be an interesting pivot to watch, I've been kind of betting with myself when will the first week come with no news or good news for uber. I thought they'd have spun up the pr machine months ago, talking about co2 saved by carpooling or something. Giant company, currently fixed runway, all eyes on it and damaged culture. If uber doesn't die, the next CEO is a superstar.

Being an asshole (in some senses of the word) is necessary, it's just incredibly difficult to compartmentalize the good aspects of being an asshole (holding people to tough promises and standards, being unflinching in stating the truth to people's faces no matter how impolitic or uncomfortable) from the bad aspects of being an asshole (bullying, abuse of power).

It often does, really.

Not for ride calling apps.

For human rights issues, yes, I tend to agree.


Correct. This is why you see almost no billion dollar "tech" companies coming out of Scandinavia or Europe in the past 10 years. The places with so called, work life balance.

That is a spurious relationship at best. Actually you couldn't possibly have chosen a worse example. Scandinavia actually has the highest share of billion-dollar exits compared to the rest of the world (7% of such exits compared to 2% of global GDP and 3% of total European population) http://nordic.businessinsider.com/the-nordics-are-the-best-f...

Anecdotally, famous Nordic startups include Spotify, Skype, Mojang (behind Minecraft), King (behind Candy Crush, Farm Heroes), Rovio and Supercell.

Where in the world is it easiest to get rich?


This guy makes claims with 0 evidence. Points he makes:

1. Nordic countries have more über wealthy per capita.

2. Nordic countries are social democracies.

Then he draws the conclusion, with no corroborating evidence, that these two things are inextricably linked. No data to link these two points at all. Nordic countries in general have a high GDP PPP, and that is probably not solely (or at all) due to being social democracies. Scandinavian systems need to be efficient due the nature of their environment, e.g. they have a lot of land and not a lot of population, and fairly harsh climate (e.g. poor farming conditions). I would almost argue that "being cold" is probably a better indicator of national wealth per capita than "being a social democracy" (though admittedly, I haven't done thorough research either). I mean, look at Canada. Look at the non-farming bits of the US vs. the farming bits. Look at North versus South Italy. etc. Industrialization is more efficient and effective in regions where alternative methods of production weren't great in the first place.

For reference, here is the population density of the nations he was comparing (in people per km^2):

Iceland - 3; Norway - 16; Sweden - 22; US - 33; https://en.wikipedia.org/wiki/List_of_countries_and_territor...

The US has 11x the population density of Iceland. Easier to have shared wealth when each person in your country can have 11x the land they could have in another country (with the caveat, of course, that this only applies if you are an industrialized nation).

I mean, just look at one of his "indicators" - billionaires per million people. By that metric, iceland is at that top. But there is only a single billionaire in iceland. Statistically, then, it's easier to be a billionaire in iceland. In practice, however, that is not the case. Things like population subsets need to be considered. In the US, you have a very large population, which is obviously going to impact per capita stats. However, you need to ask what proportion of those people are actually pursuing wealth in a way that could ever result in becoming a billionaire. e.g. a grocery bagger, probably never to be a billionaire. A plumber? Same. A hippy in a commune? Same. No data has been shown to adjust for lack of competition. At the end of the day, you have to look not at the total population, but at how many people are actually competing to become uber wealthy. Because, while attaining wealth isn't a zero-sum game, it certainly isn't an "everyone wins" game either.

Scandinavian countries have a very high proportion of jobs that don't really have a cap on upper income, such as software/game development, banking, music production, etc. because they have exceedingly efficient economies (as he actually touches on).

However, there is not clear reason to believe that they are efficient because they have social democracies. In fact, the converse (they became social democracies because they already had efficient economies) is just as likely, if not more so.

> The US has 11x the population density of Iceland. Easier to have shared wealth when each person in your country can have 11x the land they could have in another country (with the caveat, of course, that this only applies if you are an industrialized nation).

Can you elaborate on this supposed link between population density and shared wealth in developed nations? I don't understand the logical underpinnings of your argument. Developed countries almost by definition are less reliant on local geography.

Moreover, I don't see how space metrics are even relevant here. Iceland may technically have a lot of available "land" - but more than half the country lives in Reykjavik. A similarly lopsided urban / rural population distribution holds true in other Nordic countries.

You are exactly right. I did a poor job of explaining my thinking.

My point about geography and population density needs to be related to my point about industrialization to make any sense.

It is this: Nordic countries have modern economies weighed very heavily towards industrialization/mechanization, but most importantly, they are efficient. As you say, they also have a "lopsided urban / rural population distribution", which is a much better way of saying (thank you) what I was trying to say: Nordic countries have land, but it's not good for the classic wealth generator - farming. This is why the population is focused in urban areas and is not spread out. However, luckily for places like Iceland, modern cities don't really care how good the land is for farming. An oil refinery doesn't care about the health of the soil. A modern factory doesn't care if the terrain is a bit rocky. Solar panels don't care. Mines don't care. etc., etc. Basically all modern industry is fine in a place like Iceland.

This an unexpected and immense boon to making a modern industrialized nation efficient, because on the one hand, you have major population centres with not much in-between (due to the lack of farming), which is in itself efficient, because areas you need to service with public services are greatly reduced. But on the other hand, you have plenty of space to put modern things like factories or new cities or what have you.

Compare this to the US, the country with more arable farmland than any other country on earth. Sure, the US has big population centres, but they are spread out, and many of them are still driven by rural economies. This greatly reduces efficiency, and is generally why the spread out states seem to be further behind the small / densely populated ones.

I've included the percentage of population that is urban below for comparison, according to The World Bank, from 2015. Also, I think it is slightly different when the rural population is doing something like fishing (Nordic) vs farming, but I won't go into that here.

US - 81%

Sweden - 86%

Iceland - 94%

Comparing anything to the US is a little bit silly though, because the US is comprised of 50 states, all of which are quite a bit different from each other. For instance, I bet the uber wealthy per capita in say California or New York is much, much higher than the Nordic countries. So the obvious answer to this video is probably "move to New York or California if you want to make a lot of money". I will say that would probably require more initial capital than a nordic country, but if you have the initial capital, then your chances are probably better. SO THE ACTUAL ANSWER IS: Get a great education and livelihood in Norseland while you're young, get some seed capital, and move to Cali/NYC/etc to really start making bank.

Obviously if you want to become a billionaire, you're not going to move to Plano, TX. Yet Plano is affecting the per capita stats.

That is a bad example - Scandinavia is punching way above it's weight and reputation in terms of number of unicorn startups[1] produced on a per capita basis.

Sweden has a population of 9.8 million yet it has produced Skype, Mojang, Spotify, King, Klarna [0]

Australia has 2.5x the population but only two unicorns. The UK and London market themselves as the capital of unicorns in Europe yet with 6.5x the population they have either the same number of unicorns or just four more (depending how you count them).

That is remarkable for a country like Sweden, especially when considering the strength and size of the Swedish expatriate community in tech around the world (many tend to leave).

In terms of similar results, I think only Singapore is in similar or better unicorn per capita territory.

[0] http://www.technologist.eu/sweden-the-land-of-unicorns/

[1] "unicorn" isn't the best measure since it is a private valuation and you can get different answers depending on who you ask, but most people would recognize those Swedish startups as being successful.

>Sweden has a population of 9.8 million yet it has produced Skype

Skype is Estonian.


Skype was a started in Sweden, by a Swede and a Dane. They then however set up a dev office in Estonia where the initial client was developed and set up their headquarters in Luxembourg, I'm assuming for tax reasons. They have however always had offices in Stockholm. That being said Microsoft has announced that they're closing the Stockholm Skype office to consolidate the development to Estonia.

Remind me again what unicorns Australia has? Atlassian is not one of them, having left due to AusGov being so anti-startup.

Depends on what you mean by "left".

We are technically a UK incorporated company, headquartered and half our staff in Sydney and many of our staff and customers in the USA.

I still consider us Australian though.

Thanks for your comment! My apologies, no disrespect intended - I should have clarified I meant "left" for the purpose of your IPO. It was and is fantastic to see Australian talent prosper to such heights.

I see many clever companies where I live in Melbourne - however I am saddened by what I perceive as the neglect the government is showing for the tech sector, especially startups; I'm looking e.g. at how share options are taxed. I believe there's a lot of lost opportunity here.

Per-capita is meaningless in this context without frequency also calculated.

> The places with so called, work life balance.

I'd rather have a real work life balance (it's not so called, it's very real) than any amount of abuse working for a US style startup would throw at me.

Most of my colleague would as well.

To have the disdain for life you seem to display you must live in a very distant place from a sane version of reality.

Consider the possibility that the disdain may be ironic :)

There was a great scene in a Clive Owen movie - Shoot Em Up - where he goes on a bit of a rant about the correlation between fancy cars, driving like an asshole, and success. I think there's a small level of vague relevance here.

"Mr. Smith: I move my finger one inch to use my turn signal. Why are these assholes so lazy they can't move their finger one fucking measly inch to drive more safely? You wanna know why?

DQ: Not particularly.

Mr. Smith: Because these rich bastards have to be callous and inconsiderate in the first place to make all that money, so when they get on the road, they can't help themselves. They've gotta be callous and inconsiderate drivers too. It's in their nature."


Europe has plenty of passionate "asshole" founders and other workaholic types. The lower avg valuation of the tech scene has more to do with investors and general aversion to risk, dependency on public sector financing (really awesome but limiting in maneuverability), stronger status quo legislation, reduced VC scene and a more limited early-adopter audience for your products.


Edit: you did say 'almost'.

Mojang, Skype, Klarna, King and couple others. Sweden produces probably more unicorns per capita than any other country.

Don't forget Supercell and Nokia (which are Finnish). And it might not be a startup, but Ikea too.

Skype is Estonian.

Skype (the company) was founded by Niklas Zennström, a swede. Skype (the software) was originally developed by estonians.

The company is what is pertinent to the discussion :)

It was founded by Niklas Zennström and Janus Friis (Danish) in equal measure. The software was based on Janus Friis' earlier work (the Kazaa p2p network). It was developed by an outsourced team in Estonia.

As a Dane I'm a bit embarrassed to forget Janus Friis. Thank you for the correction and elaboration.

I don't know, during the last decade we've had billion dollar tech companies such as Spotify, King and Klarna come out of Stockholm which isn't the largest hub in Europe.

So what? Even at Uber, 90% of their employees, the ones who actually made the company as valuable as it is, won't see much in terms of reward for it, and they'll have sacrificed that work-life balance to do so.

"Behind every great fortune is a great crime" - Balzac (kind of[1].)

[1] http://quoteinvestigator.com/2013/09/09/fortune-crime/

What even is this question? Nothing "have" to come at the cost of anything. It's a matter of choices and people will make different choices.

Morals are relative.

That's a hyper generalization. Some morals like no tolerance against sexual harassment are not relative.

I can't think of a way to take this statement that makes it true.

I don't know how old you are, but public morality towards sexual harassment just in the U.S. has changed in my lifetime. (For the better, although it is currently ugly and messy, as these changes always are.)

Even attitudes about what constitute harassment vary by culture between similar cultures. Compare Italy and Germany.

You mean legally? I'm pretty sure there are people on this universe that differ from you (and many of them act on it)

And that's because morals are not policed. People will always abuse power. Hence Laizze free is impractical and we all need oversight.

I think you mean policing "law" better. Policing "morals" is not possible since as I mentioned morals are relative. It is a dangerous thing if Police or state actors act on moral rather than law.

Of course not, but there isn't another option for Uber. Second place isn't good enough, not with their burn rate. You need Ghengis Khan if you want to slaughter and conquer.

It's this slaughter and conquer mentality that has caused them so many problems. I mean Lyft's main selling point to consumers has been 'Uber without all the attitude.' If Uber had been a little more customer-focused and emollient a few years back, they'd have held onto a much larger slice of the ride-sharing market.

Look at Google; they're firmly business-minded and have often butted heads with regulators and so forth, but most people like google, not least because of that 'don't be evil' branding and and their habit of giving people Nice Things.

That mentality itself hasn't caused Uber's problems. It's just their inability to successfully conceal it, as other big companies do. Kalanick was likely too idealistic and didn't place adequate weight on appearing soft, which allowed the press to rake him over the coals.

You make it sound like its an option. Its not.

If your margins are razor thin. You have to be ruthless. That permeates to your culture.

Do you things are any better at Amazon, Foxconn or other warehouse places?

> If your margins are razor thin. You have to be ruthless.

That has nothing to do with sexual harassment. And to imply that the two must be linked is false.

Neither did I mention that. Why did you associate those two things?

Does 'highly demanding environment' == 'Harassment' to you? If yes then you have far bigger problems. Any demanding mission ever might be out of reach to you per your value system.

Work conditions, overall demands of productivity et al will be brutal. And that ultimately gets to cause all sorts of other problems. People who just can't catch up with all the rush ultimately feel discriminated.

> People who just can't catch up with all the rush ultimately feel discriminated.

Non sequitur. You're also generally espousing some pretty reprehensible ideas. We as a society do not take the view that business success overrides all soft concerns, especially with regard to their employees. If ruthlessness and discrimination is the grist that your mill requires, find another mill.

Also please avoid working in management.

>>We as a society do not take the view that business success overrides all soft concerns, especially with regard to their employees.

This is obviously wrong. Have you ever bought a iPhone? Or any other Apple product. Have you ever ordered anything from Amazon.

How do you think Walmarts and Targets of the world can sell you things for so cheap? Behind all this there is some guy being sent through some real hard ships.

As a consumer you have already made that choice.

Third world labor conditions suck, whether or not Apple or Amazon is involved. We were talking about working conditions in this country, however.

The reader will note that this is a classic example of the 'tu quoque' fallacy[0].

[0] https://en.wikipedia.org/wiki/Tu_quoque

If I can reach back to your earlier comment, it seems that your premise is that when margins are razor-thin, 'Work conditions, overall demands of productivity et al will be brutal.'

My answer to that is then there is something fundamentally wrong with your business model. Basically, what is the point in running a business under which such conditions are the norm?

Any demanding mission ever might be out of reach to you per your value system.

This is fallacious. Of course there are times when struggle is necessary. A rewarding life (however you define reward) certainly requires an investment of effort, and at time that effort will be very difficult. Sometimes we are faced with very trying circumstances such as natural disaster or war or serious economic insecurity, and we have to work very ahrd to survive.

But a key word here is sometimes. If you deliberately construct such an environment where survival and advancement are only possible through 'brutal' work conditions and demands of productivity, then you are actively making the world a worse place, because you are establishing such brutal conditions as a norm and implicitly telling people that their life choices boil down to slavery or death. Why would any sane person want to create the conditions of slavery? Slavery is a condition of life that people rationally wish to escape.

There seems to be this attitude that if people are not constantly driven by necessity then they'll get too comfortable and lazy and never do anything. This is not borne out by the evidence. Some people would, not least because they're constantly bombarded with messages to consume, consume, consume whenever they can as a relief from their economic anxiety. But few people are fundamentally motivated by gluttony. Given the opportunity most people opt to develop their capabilities and contribute or create rather than merely consume.

Choosing to promulgate brutal working conditions is essentially promoting brutality as your preferred model of social organization. That's basically a displacement of sadistic and/or masochistic impulses into the economic sphere. You may very well feel that nothing of value happens except under harsh compulsion, but that seems to both ignore all the evidence to the contrary (an irrational bias) and abdicate responsibility for the consequences (since brutality is well-understood to result in wholly avoidable injuries).

It seems to me that your value system rests on some rather extreme assumptions that are not justified by the available evidence, and insofar as it imposes compulsion on others rather than being used to motivate yourself, it's intolerable. Put another way, if you only feel alive and productive under conditions of harsh necessity, that's your business. But as soon as you insist that this is the way of the world and that others must get with it or be cast aside, you're infringing upon the freedom of others. And at a social level, through regulatory process, experience of litigation and so on, we've agreed that the creation of such conditions is not an acceptable means to pursue arbitrary ends.

>>Basically, what is the point in running a business under which such conditions are the norm?

As usual : 'Value'. All these affordable iPhones and seamless Amazon deliveries happen because they have a work culture that optimizes for every single $. I agree with your premise that these are not for everyone. But this is precisely why we have freedom. Nobody should sign up for a job they think is too hard for them.

As we talk there are doctors who are training by the clock, sleeplessly working towards becoming surgeons. This is necessary for various reasons. If it were any easy, people would become bad doctors with less training. This is bad for society. The fact that work conditions are harsh- that isn't wrong or discrimination or even harassment. The very demands of the job are such.

The top percentage of any profession are this way. That comes with the job. You just don't go and say why don't they make it easy to me to be the next Zakir Hussain. Mr Hussain has set pretty high practice benchmarks practicing his instrument pretty much his whole life. Was it worth for his to have undergone all that pain and punishment to get there? May be that fits into his value system.

If you want to beat Jeff Bezos you have to at least perform at his level or higher. You just have to chose your mission based on the mileage you think you have.

It apparently did mean that to Uber, which is the topic at hand.

Making decisions at the cost of their employees' well-being didn't keep them in first place. Having a toxic work environment for women didn't put them in first place.

> Having a toxic work environment for women didn't put them in first place.

No, but that's not the point. How quickly we forget that we don't need dude bros to create a hostile environment for women. That GitHub situation was created by a woman, one who wasn't even an employee. We really don't give women enough credit.

Toxic work environment is everywhere. Remember the spreadsheet that Googlers started to compare salaries? I'd argue the Apple-Google-X pact to not poach one another is worse than anything Travis could imagine.

If there was crass behavior at Uber, I'm inclined to be more lenient because I think it is at a more primitive level than a well thought out plan to increase shareholder value by illegal collaboration to push down worker cost. If these people who criticize Uber really care about their employees, they will start publishing all details about how much salary and benefits and whatever money each employee makes.

Talk is cheap. Actions speak louder than words.

Yeah, but winning meant becoming big while loosing money and saddling company with long term problems. Investors likely care about the money thing more.

There is no easy way for these people to make money. Not unless they start charging their customers some multiples of price higher than they are doing currently.

Here in India, I go by the office cab to home everyday. I generally chat with the drivers as to why they don't drive for Uber/Ola etc. The answer is they need to make a good 1300 rupees on a round trip to be profitable, at a minimum of 6 trips per day. A trip with Uber/Ola etc costs 300 rupees(With pool). But even then!

So that's like these people need to start charging a minimum of 5x extra to make profits. At that price these people are no longer a viable means of transport.

To be profitable you need to back to the yellow taxi medallion thingy all over again.

EDIT: Fix a mistake.

That's less than one order of magnitude (10x), but of course the point stands.

Another definition of 1 oom is anything between sqrt(10) and sqrt(10)*10. Basically 3 to 30. 2 oom, 30 to 300, and so on.

So if the (now edited) original intent was exponential, "more like 10x than 1x (or 100x)", then calling 5x an oom is fine. If the intent was linear, then yes, rounding 5x to 10x is 100 percent error (difference/actual). :)

Huh, interesting. Wasn't aware of that :)

> Now I am a bear on Uber.

I'm headed in the opposite direction and reinstalling the Uber app tonight. This is a very convincing capstone to a 180 degree course correction away from everything I disliked about Uber. I also hope Travis can learn and come back and lead the company again in the future.

They currently have no CEO, CFO or COO among other unfilled positions. Even once they bring on new people, it will take them time to become acquainted with Uber's massive worldwide operation... All taking place within a rapidly changing industry.

I'll grab my popcorn, this will be fun to watch.

> Notice that leveraged loan in 2016.[2]

Traditional firms will generally prefer debt to equity as you will generally get a better shareholder return on debt. VC backed firms do not usually raise debt -- even if it is preferred -- because they are viewed as too risky by banks. When VC-backed firms raise debt it is because they are transitioning out of high risk to the stability of a established and predictable firm.

In some Nobel-winning economic theories the best capital structure is all debt: https://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theo... https://en.wikipedia.org/wiki/Capital_structure

If the only thing about this loan that makes it "leveraged" is its interest rate of 5% then that is probably preferable to equity and not a red flag.

That only applies if the company is profitable. For a money-loser like Uber, taxes are not an issue.

Alternate take (not originally mine): the bad state of Uber's financials is the cause of Kalanick's ousting. If the company had a longer runway, or wasn't facing the prospect of a down-round, he could have gotten away with anything.

This seems like the obvious rebuttal. Kalanick could have resisted any simple vote to remove, so this isn't a case of liking the results but not the methods. If Uber had strong financial footing, Kalanick would have been able to stay (and there would have been less interest in removing him).

I'm curious how much Kalanick has already taken off the table. That may be a motivating factor in his decision. If he has already pocketed hundreds of millions, he may understand that this could well be the death of the company, but just isn't motivated enough to fight these investors and is willing to let them burn the company to the ground. I wouldn't go as far as to say he doesn't care anymore, but being forced out of your job and the potential evaporation of billions in paper wealth isn't such a catastrophe if you already have enough money for several lifetimes in the bank.

Kalanick has stated publicly that he has not sold a single share - so he has actually taken no money off the table whatsoever.

Surely a company with billions of valuation will pay a decent CEO salary even if said CEO happens to be the founder / main shareholder?

Perhaps he pledged a small fraction of his shares to collateralize a non-recourse loan. This is one way to monetize equity without selling it.

The lender takes the risks as to share value and liquidity. If presented early in Uber's climbing valuation curve, it probably would have looked like a good opportunity to lenders.

I hadn't heard that. When did he state this, and is it still accurate as of today? It's possible he sold shares in the last few weeks during the run-up to this decision. Or maybe he hasn't sold shares, but there are other ways that he could have profited handsomely from Uber already. Cash bonuses, private sale of options (has he said he hasn't sold an option?) etc. I'm just saying if he has enough in the bank, he may have decided it wasn't worth it to fight his investors, the media, and basically everyone else that has jumped on the anti-Kalanik bandwagon.

http://video.vanityfair.com/watch/the-new-establishment-summ... 33:45

It's actually would be a major news point I think. Whether or not Travis sells his shares is what's gonna be decisive of his position in the company and possible future ambitions.

PROTIP: Shareholder loan

Exactly what I think!

> Uber has less than a year of runway left at their current burn rate.

Do you have a source for this?

Though not yet proven, wasn't a similar logic used by HR (or higher management) to justify not taking action against "star performers" for their transgressions?

Almost exactly the same, came to mind when I read that also.

I suppose there's some tipping point of "very valuable" and "not that badly behaved" where the argument is actually valid (see: all the Steve Jobs references in this thread). But at that point I guess the ethical solution is to make it very clear what new hires are in for, and pay a healthy "dealing with this person" bonus (see: Steve Jobs, again).

So Travis created an insane valuation but the business isn't viable? That sounds like bad management to me. They may do much better without him.

Keep in mind a company can be said to be valued at 100B today and 100M tomorrow yet everyone involved can still turn a profit.

What matter are: Cash In Bank, Cash Coming In, Burn Rate.

Agreed. My point is that the fundamentals don't live up to the valuation.

They were run in a way that assumed funding and burning money to get there. If they suddenly need to turn profitable, they can still downsize a lot. Consider their 2000 engineers... That's on an established service. Sure, they would slow down new features and expansion, but they've have expenses they can cut. And prices they can raise.

> This may kill Uber.

Counterpoint: businesses in good shape don't just drop CEOs. This move might just help it die slower.

Not every round has to be an up round. They could decrease their valuation significantly and still survive. Surely there's plenty of value left in Uber.

This may kill Uber.

Highly unlikely. Why? Investors who stomach multi-billion dollar annual losses will probably just shrug off the recent bit of trouble. If the choice is to either write off $15 billion or to give another couple to help the company go through a rough patch (what a buying opportunity!) I think I know what investors are going to do.

Kalanick's head has now rolled (not that it really hurts him much personally though, it's probably even a relief for him) but seriously a whole nother level of crap would have to happen with Uber before investors start getting comfortable with the thought of letting go those $15 billion.

Your comment is predicated on the fallacy that Uber's success is merely a function of runway / the ability to find new investors.

Bear in mind that the company's growth has been driven by its ability to run a very, very highly-performant backend -- and that's in turn a matter of getting the very best engineering talent on board.

Some, perhaps most of that talent is already pissed off about the fratty work environment and questionable leadership decisions. Recently, their options exercise window changed from 30 days to 7 years[0].

Angry employees + management turnover/uncertainty + limited runway + new rule that basically you don't lose your options when you quit = I'm officially an U-Bear.

On a related topic, I think people's schadenfreude for Travis is getting out of control and he's becoming a bit of a totem for everything that's wrong with SV....while his issues are largely self-inflicted ("boob-er" / treating drivers like crap on camera / etc), all the hatred directed toward him seems excessive in context. The guy just lost his mother, maybe cut him some slack?

[0]: http://www.bizjournals.com/sanfrancisco/news/2017/05/16/uber...

How increased exercise window would hurt the company? I think it's something which pleases and reduces employees' anxiousness.

It practically eliminates the opportunity-cost of leaving. Having seven years to be able to come up with the liquidity to pay the strike/taxes -- plus, critically, being able to wait several years to get a better understanding of whether the options have value before striking -- completely changes the calculus of whether to depart a company, whether because you're unhappy or because you've found something better elsewhere.

Agree this is good for Uber employees and I'm happy they have significantly less of an impediment to leaving than most other workers at pre-exit startups.

Uber is evil. They always have been. I've been trying to talk my friends into boycotting them for years because of their corrupt practices, and the various scams they've run on their drivers. Their highly-performant backend was used to place "ghost cars" and avoid government officials. The timing on this is, yes, frustratingly arbitrary, but this really is the whirlwind they have sown.

Also known as the Gambler's Fallacy.

i think it's sunk-cost fallacy rather than gambler's fallacy.

LOL you're right. Absolutely. I wrote that at like, 7 am as I read HN to help me wake up in the morning. That gave me a chuckle.

Haha I also read HN to wake up in the morning and have made my share of mistakes early on.

There is a lot of vested interest in this company - it will for sure never go down. Plenty of investors around the world who will buy in. Valuation is a different topic - but this company is here for the long haul.

Does anyone think that Amazon could be eying Uber but waiting for them to lose value? Seems like it would be a natural fit for their delivery network especially considering their recent purchase of Whole Foods.

Amazon already has Flex. Source: I'm a software engineer in that team. Uber is way too expensive at this point.

There's no doubt that Amazon has much more established delivery logistics than Uber at this point, but I wonder if the real value would come from another angle:

Uber has been pushing hard on self-driving cars (I mean, in the long term, it strikes me as their only viable business model, so it makes sense). By my best estimates, salary for delivery drivers for Amazon packages run somewhere between $6B and $10B per year (for comparison, if I remember correctly, Amazon's revenue is somewhere around $35B/yr). Automating delivery could be a HUGE deal for them, and an opportunity to scoop up a major player in the autonomous driving space might look very appealing.

Then again, with Washington State throwing the doors open for autonomous testing, Amazon could likely develop their own system on their own turf for less, even if Uber's valuation goes WAY down.

Minor point-- Amazon does about $35B per quarter.

Wasn't a bunch of Uber's self-driver 'expertise' just stolen IP from Google?

I think we'll have to wait on the courts to find that one out

At this point, sure. In all likelihood, the actual operating business is more fairly priced in a fire sale. Free up overhead by trimming down the "eat the world" grandiose plans, cut growth-for-the-sake-of-fundraising subsidies, add some haircuts on bondholders, and you've got something that will reasonably work.

From a tech perspective, we have developed systems that actually work much better than what Uber has to offer for our use-cases. Their systems have been developed to solve for the "real-time" dispatching scenarios. That's not what we're optimizing for with Flex. Hint: it's the opposite.

unless uber's logistics is better than amazon's (spoiler: they're not) uber is only valuable as a brand to amazon. brand probably doesn't move the needle for delivering groceries

I'd prefer Apple to buy Uber as a $AAPL shareholder... Nevermind this is all nonsense.

But why? Is there any synergy between Apple and Uber?

> Kalanick is a jerk, but he created that insane valuation.

I don't think Kalanick had much to do with it. He created the product, but it pretty much sold by itself -- similar to how Zuckerberg created Facebook, which sold by itself.

I'm very optimistic about this change. To me, Kalanick, and the culture he bread, were toxic to Uber.

I'm reminded of how Microsoft's share price jumped by 12% the day Steve Ballmer's retirement plans were announced. Microsoft has been on a major run ever since. Let's hope that we see something similar here.

> I don't think Kalanick had much to do with it. He created the product, but it pretty much sold by itself -- similar to how Zuckerberg created Facebook, which sold by itself.

Nope, This is wrong. Kalanick stood in front in the fight against the City officials and Taxi unions across the globe. Uber could've been done and dusted had it been left as a product to be sold by itself. Kalanick pushed Uber up high against the current of water, which is not exactly similar to running a Social Media Company.

> Nope, This is wrong. Kalanick stood in front in the fight against the City officials and Taxi unions across the globe.

Don't kid yourself, this fight was fought by lawyers and lobbyists.

Uber financed one side of this fight, but seeing as the outcome of this fight was critical to Uber's business model, that wasn't some genius insight, that was self-preservation.

That might be a big deal in America, but it has not been part of Uber's appeal in Australia. Uber here is absolutely focused on the product experience.

If anything, there's a proportion of people who supported local government rules and existing taxi services over the American interloper, a counter-balance to the anti-union and anti-municipal crowd.

Please be mindful that the American experience does not translate globally, even to other english-speaking western countries!

I think you're really just reinforcing the point. He's been willing to do whatever it takes. In the US that meant testing how far he could push and how many regulations he could bend and break before people called him on it. In Australia, apparently, that means first pushing the product experience as far as possible to convince people Uber is much more desirable than taxis.

And regardless of that, it doesn't matter: by the time Uber started operating in Australia (or any non-US country, for that matter), they already had a history of pushing hard against existing norms. Uber would have never even gotten to the point where expanding outside the US would have been possible if it hadn't been for Kalanick.

Sure, he's a jerk, but to claim that he had nothing to do with Uber's expansion after launch is just absurd.

As an Australian - I thought Uber's main appeal here was price. The taxi product experience, from everything I've heard, is far worse in the US than here.

Uber's appeal in most markets is exactly that, product and pricing. Speaking from a place where taxi service was terrible, inefficient, expensive, often corrupt and dangerous, Uber came in like a savior, when the government went after Uber people came to Uber's defense because now we can't go back to the way it was. To be fair I think that is the same as most places Uber has been to.

But this was done globally though.

'Software company, Not a taxi company' argument was used extensively to circumvent license and medallion regulations. On top of it they used VC money to drive down the prices by 4x-5x.

Several tens of thousands of drivers in every state in every country they went to got shafted because of these moves.

So yes he was very brutal and ruthless upfront. You can't replace that kind of human quality easily.

Drivers didn't get shafted. Medallion owners did.

Drivers did get shafted. Imagine if tomorrow somebody comes with some model which flushes 10x the current number of programmers into the market.

Your wages will dilute to a point it will be hard for you to make a decent living.

Medallion owners charged huge amounts of rent from drivers. The barrier to entry wasn't on the driver side.

> it pretty much sold by itself -- similar to how Zuckerberg created Facebook, which sold by itself.

Haha don't know where to start. Facebook could have gone to shit in so many ways just like all the predecessors like Myspace and Friendster, but they made all the right decisions and won. Same goes for Uber.

Ok, what is Facebook's Lyft then?

Uber and Lyft operate in a space where there's a huge barrier to entry capital-wise.

This is not the case for 100% Internet based businesses like Facebook.

So they're really completely different models and therefore the competitive landscape can't resemble each other. It's more fair to compare the Uber-Lyft dynamic to rental car businesses like Enterprise-Hertz.

There doesn't have to be a single global monopolist. There probably won't be.

People do move, and the convenience of one app to hail taxis everywhere is appealing. But then again, people don't move that often that installing the local taxi app is too much of an assle.

No no, you've got it a little bit backwards. Right now, the biggest profits for capital are in being bearish about Uber and shorting Uber. This is in the nature of amoral capitalist investment: all the right decisions are 'supporting and enabling Uber' right up to the point where the bubble of valuation pops and then the only right decisions are 'bailing and running away from Uber'.

Kalanick's right decisions are now based on how much he was lying when he said he hadn't divested the slightest bit from Uber. I'm guessing that everyone read his character well, and that he was in fact lying on a massive scale and has many lifetimes worth of stashed-away wealth. Right now, winning for him means avoiding prosecution and jail (probably easy to do) and Uber is over, already.

So Uber lost, and anyone still clinging to Uber has lost (but there will be amazingly few of those). It's the frog and scorpion fable, really. Travis isn't the scorpion, and Uber isn't the frog. Uber is the scorpion and Wall Street is the frog.

What do i have a little bit backwards? You are free to talk about your opinion but it's kinda confusing when you just reply randomly to an unrelated thread.

I am talking about how execution matters, because parent said Uber just worked on its own to get where they have, just like Facebook worked on its own to get where they have. None of these are true.

My comment has nothing to do with wall street or shorting or whatever concepts you bring up.

You've said 'Uber and Facebook made all the right decisions and won'. I think you've got that backwards (and was indeed replying to you): I think it only looked like they made right decisions because Wall Street looked at those decisions and went 'hot damn, one of us!'.

Facebook may have won. I think you'll find Uber didn't win, because Wall Street needed Uber to remain the Travis Uber, in spite of any laws or limitations, and that's clearly no longer true.

Wouldn't investors be able to look at ownership information to see if Travis's shares decreased? I doubt all of the investors would take him at face value, especially the ones who publicly criticized him.

You can't really short/long the stock before it goes public. I'm not sure if there is a derivatives market that speculates on pre-ipoed companies.

It's essentially the same mechanism: the terminology is immediately understood. The market is public opinion, in a rather special public. If these people all 'short' Uber, it might not even go public. I guess the equivalent would be trying to take all the VC money back? And obviously the equivalent to a long position would be investing more VC money in Uber.

Nobody would seriously argue that there's no difference between the two because Uber doesn't exist yet in 'stock' terms. They need to translate the initial investor enthusiasm into an IPO, so short/long spells out the likely climate for said IPO.

Are you shorting Uber or wall street?

Microsoft had a storied past with decades of profitability behind it. They were shedding an operational CEO who failed to succeed in Mobile and made expensive mistakes in tablets (Windows RT) along with the Windows Vista debacle happening under his watch.

Uber has lived in Unicorn land thus far. The potential to turn a profit has buoyed them but that cash bubble seems to be running out of fumes. They could sell for 1/10th of what they raised money at. Time will tell.

It's a bad time for Travis to be handing over the reigns because he clearly hasn't built a command team to takeover and the fraternity atmosphere is toxic enough that as these new leaders step in I'm afraid the middle management will view them as "illegitimate" leaders.

Time will tell. I hope for the sake of all the people who hold Uber stock as part of their compensation that they get a pay day but it's a gamble.

Facebook did many things right. How many people really thought Facebook would be a $450B company in 2017, good for top 5 most valuable company, and pulling in over a billion in profit a month. Yes most of the money is being made on mobile which likely wasn't the master plan of Zuckerberg or others. But things had to go right up to 2013/2014 to allow Facebook to become huge in revenue and profits with its mobile business.

We don't know exactly how much influence Zuckerberg had in all the decisions. For example the common theme for years was for there to be uproar after any major feature or change.

Like the news feed that is now ubiquitous. A worse company might have feared the backlash and slowed down on features and growing the news feed.

I assume Zuckerberg was also fundamental in acquiring Instagram and Whatsapp. Instagram is worth tens of billions now. Whatsapp has 1.2B or so monthly users. There were many comments on how overpriced and silly the Whatsapp purchase was. But most of it was in stocks and the cash at the time may have been a lot ($4B), but Facebook gets that much per month now. Whatsapp tripled its users since its acquisition.

A lot of tech people disliked the Messenger split off. But that seems to be working out for the business too. It is becoming its own platform now and can also boast 1B+ users per month.

Maybe anyone would've done all this. I don't know. But I do know it was Zuckerberg in charge when all this occurred.

Facebook had a major ace in the hole by starting at Harvard. That's the network pretty much everyone wants to be a part of.

The irony is that in growing, FB traded down that cachet -- but managed to transition from cohort value to network value fairly successfully.

This is an argument I've made for years, I'm happy to see that I'm not the only one -- danah boyd has mentioned it several times as well.

I'm not saying Zuck didn't execute well -- the advantage still could have been blown (and I've only just learnt of a similar network started IIRC at Columbia University which didn't go as well). But for all the things Zuck can claim, building Harvard's social appeal is not one of them.

>but it pretty much sold by itself

It's called execution...

... an execution that Uber's investors apparently could no longer tolerate.

My comment that Kalanick didn't have much to do with it seems to be generating a lot of downvotes. This is surprising to me.

The reason I compared Uber's success to Facebook was because demand for the product was so great, it was viral. It's hard to mess up a product that is so incredibly popular.

Perhaps Instagram would have been a better example to communicate my point. Its initial success was clearly not anticipated even by its founders, and its success continued despite numerous hiccups and screwups in its early days. I posit that its founders ability, which was clearly limited (by their own accounts), had much to do with its success.


Kalanick had everything to do with the valuation. This, however, is a problem: what you might think of as premature optimization. Yes, Kalanick is why Uber got an impossibly high valuation from the collective fantasy known as Wall Street: they were operating based on personalities and primitive ideas of conflict, rather than a real understanding of how systems work.

But it was a premature optimization because those responsible for turning 'viciously competitive evil guy' into raw capital failed to acknowledge that he'd screw them in turn as soon as he needed an exit strategy. You simply cannot turn to childish human dominance battles as a model for what will work in large systems and interdependent markets.Even propping up your 'pet winner' with near-infinite capital won't save you forever.

I think its wrong that facebook sold by itself, in the beginning there was lots of competitors and I dont think it was by chance facebook won.

Overnight success, years in making.

I agree ... but I wonder if the only reason Uber has grown is the way that it's bullied its drivers and the communities it "serves". I'd say that his personality and drive has caused both the companies successes and its problems. I wish there was a convenient way to short Uber via my discount broker.

Especially interesting is that Uber may already have been essentially doomed, and now it is will be very easy to make the case what killed Uber was "do the right thing" forced-resignation of the founder by 5 of his investors. That seems like lose/lose for them.

can't they just cut their burn rate? I mean it's not like they own a fleet of cars they need to make car payments on and fill with gas to keep operating.... in theory there's no minimum spend to keep operating, is there? if (hypotehtically) they cut spend to approx. nil, and 95% of their drivers left, then 5% of their drivers would remain and they would be profitable... where does the "killing" of Uber occur?

Yahoo for example is coasting along at a market cap of 53.40B down from its high of over $125 billion[1]. In 1999 dollars. Is it "dead"?

[1] http://www.businessinsider.com/yahoo-market-cap-over-time-20...

Yes, they can cut their burn rate.

But if they cut it too much, they'll stop growing.

The problem is they need to sustain their 70 billion dollar valuation for investors to be happy.

To be worth 70 billion they have to be either:

Growing at a very fast rate (which requires a very large burn rate to sustain)

Or be generating billions in profit each year. Even with a cut burn rate, they aren't going to be generating billions in profit. So they won't be worth $70 billion.

Keep in mind that if their leaked financials are to be believed, they made $6.5 billion in net revenue for 2016. Unfortunately total costs exceed revenue, so they are far from profitable, but that's not exactly chump change.

What are they counting in net revenue? As they bill themselves as a brokerage service (to avoid those pesky employment laws...), I would imagine they only count their commission in net revenue? 6.5 billion is pretty impressive then!

They included all of the revenue (i.e. gross revenue) from Uber Pool in that figure.

> and 95% of their drivers left, then 5% of their drivers would remain and they would be profitable... where does the "killing" of Uber occur?

People will stop using Uber if the wait times get really long, which they will if most of the drivers leave.

If 95% of their customers left, then 5% of their customers would remain and... Well, if they shut off 95% of their servers... Are we profitable yet?

It's probably eminently practical for a company of this type to cherry pick the most profitable core areas of the most profitable urban areas. Which is effectively what services like Instacart do. But it's not scalable and won't command a high valuation.

Just making a profit isn't enough; they need to make a big profit. Kalanick could probably turn a profit if he fired the whole company and drove a cab himself, but that's not gonna placate the investors who sunk hundreds of millions into it.

Nope. They're subsidizing most trips in order to keep prices low.

Their profitability problem isn't just one of opex. They don't have margin, either.

obviously the least price-sensitive 5% would remain. it's not like they're running currency exchange or something - people don't have a super set demand curve. maybe 95% of their customers do, but not 100% of their customers... (unlike a currency exchange, for example, which would drop to precisely 0 users worldwide if it increased prices by just 10%, since 100% of any such users are super price-sensitive. likewise if a currency exchange subsidized exchanges by 10% it would have more users the next day - by far - than people on Earth. easily a trillion "users", or whatever the rate limit is for signing up and performing exchanges. try to visualize these two different demand curves and you will see that Uber should still have some users if they raise their prices, because not all of them are completely price sensitive and only use it because it subsidizes rides, and not for any brand or convenience reasons. unlike a commodity currency exchange which exists under ironclad demand curves that drop to 0 if you move along it even slightly. picture these curves.)

Can you provide a source for this? I'm honestly very curious. I've seen this claim bandied about for years, but I've never seen a source that verifies it. Is Uber really losing money on a marginal basis in developed markets?

Here's an article with citations from November of last year. Note that it does use data from 2015, since at the time that was the most recent publicly-available published data.


Thanks, this is terrific.

My main takeway: revenues are higher than their cost of sales. In other words, they are earning money on marginal rides served. Not losing money.

To me, this suggests that profitability is plausibly achievable if they end subsidies into small markets and drastically cut development costs.

The writing has been on the wall for years. Never believed Uber would transition to profitability.

Ever rising valuations can't save the company, so I don't see how Kalanick's departure threatens its prospects for survival. "More of the same" isn't a winning strategy for a company that's not on the right track.

I may be simplistic or naïve, but if your business isn't profitable, that's what kills it. Travis or no Travis, it doesn't seem like Uber has found a way to cut a profit yet and at some point, profit becomes a requirement.

Uber can probably be profitable tomorrow if it wanted to be, but then it would have its long-term opportunities gobbled up by others

I hear all this doom & gloom, but could Uber not just... raise prices? Sure, they would lose a lot of customers, but they would stay alive.

How could Uber, barring wholly incompetent leadership, completely implode?

Uber needs the network effect. Lower usage means fewer uber drivers, which means it's harder for me to get a lift, which makes me use something else. So a relatively small dip can cause a collapse un usage.

Raising prices could include raising (by not as much) payouts to drivers, which could make them more attractive to drive than Lyft. Then again, if too many customers leave, then you have a surplus of drivers who get frustrated because they can't get fares. But perhaps there's a balancing point somewhere in the middle.

And many/most Uber drivers also drive for Lyft. There's no harm in leaving both apps on and grabbing a more-elusive (but higher) Uber fare when one comes along.

As a customer I can tell you Uber is underpriced by at least by 50% in my city.

Transportation is a very substitutable good. Uber doubles prices, they lose more than half their business, total effect on revenue is negative.

They're spending a lot. If they throttle back to the core business they might be able to squeak by. I do wonder how feasible that is given how bizzare their cap table is.

Seriously, it's mind-boggling what they're burning cash on. Driverless cars. Drone helicopters. Ubereats. Who knows what other pie in the sky tech that is decades away. Why would you burn cash on such things when the core business is not profitable?

Is there another company in history with the valuation that Uber has that went broke because of a CEO change?

My gut tells me that Uber's financial performance won't change

It's not clear they'd survive regardless.

This is probably great news for Tesla, or other auto makers and technology companies who would love to acquire the Uber brand and software.

What software? Their self-driving tech is tainted by Waymo's claim they stole it, so it would have to be very, very good for some company taking the risk of using it. I doubt it is _that_ good, so I don't expect to many buyers for it.

So does Kalanick still walk away a rich man at this point?

why can't they just stop the burn rate, most drivers won't jump ship and they can have a skeleton crew? or does this prevent them paying back investors?

You'd need to know what the burn rate is composed of: their engineering organisation might be less expensive than the marketing budget in a single major market.

If they cut ad spend and raise costs, then their growth story stops and other competitors have a window to move.

The go-to reading (at least a few years ago) for handling the difficulties of burn rate at a high-growth company is 'Mastering the Rockefeller Habits' by Verne Harnish, the chapter on cashflow. I think 'The hard thing about hard things' also talks about how this situation can kill your company if you're unlucky or unprepared

Being a glorified taxi dispatcher probably isn't Uber's idea of a successful endgame. They desperately want to be a big player in the future of autonomous transportation and are clearly willing to bet the success of their taxi dispatching company to do so. Cutting their burn rate to a skeleton crew means giving up on that ambition and spending the rest of their 'life' as a reasonably successful company, with perhaps some modest profits, dispatching taxis via a phone app, and neither they nor their investors seem to want that.

Isn't this a little like Madoff being vital to Madoff Securities? Uber's insane market cap is a direct consequence of a whole bunch of unethical, illegal, and barely legal activities.

"If you want a higher building, you should build strong columns"

They will change the company's current culture. Slow down the pace of growth to try to adjust what is wrong. Probably focus on where they have margin to operate. This is clear in Gary ( Uber Co founder) text on Medium.

"In a highly competitive market it is easy to become obsessed with growth, instead of taking the time to ensure you’re on the right path. Now is that time… to pause"[0]


Their valuation is entirely and utterly founded on the idea of growth, and that there is no other path. They have absolutely no chance of turning around and telling Wall Street, of all people, that it's time to pause. Wall Street only loved them when they moved fast and broke everything there was to break.

This is death. I mean, it's sensible talk, in another context it would be seen as enlightened, in a larger sense it's the right answer.

Uber aren't IN another context. They depend completely on Wall Street continuing to think they are the biggest shark that ever sharked, and now that's ruined and the only big investment opportunities are in betting AGAINST Uber. Most likely the smartest money is already out.

This is death. Shouldn't be, in a more sensible context, but it absolutely is. You can't tell Wall Street 'it is time to think sustainability' when they bet on you eating the goddamn world for them.

Wall street?

I concur. This is a very poor decision all of which stems from the snowballing and mob mentality of the outraged.

Companies at this stage in an ultra competitive market (not talking about ride sharing, but self-driving) need their founders to lead and grow. It is just too early and critical to bring in a professional CEO. See Apple.

Uber hasn't been able to show a single GAAP-profitable market anywhere, including cities in the US. Rates would have to be more than 100% higher just to archive break even. Scale economics of that magnitude are unheard of with physical products. Self-driving is essentially just a media stunt for them, just like amazons drone delivery news that pop up every year just before christmas.

Just look at the numbers in this article[1] - they need scale economics of two times the cost of the driver of the cab to archive GAAP profitability, which, obviously, is impossible even with self-driving.

[1] http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

GAAP profit? Who can show that??

he could have cleaned ship years ago with all the previous scandals but he was either too stubborn or too arrogant to think any bad news would pull his company down. he was representative of uber's toxic culture and it seems like he should have stepped down right after he was caught bad mouthing a driver FROM HIS OWN COMPANY.

Is that the video where he explains how there wasn't huge demand for upmarket cabs to angry upmarket cab driver? There wasn't much scandal there.

Correct. It's the video where the Uber driver blames Travis personally for him buying cars and his small transportation business failing. I mean, how could an incredibly high interest and high upfront capital car loan into a very speculative and low margin business be risky? It must be Uber and Travis screwing him.

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