Uber pays more than $3.5 an hour. Where are you getting that number?
Uber and other ride sharing services are so much better than taxis, why would you want them to die? Uber's international support is amazing and has made international travel far more safe and convenient.
Please don't call it "ride sharing", which is when 2 or more people going to the same place share the cost of transportation. There is no profit motive involved.
What Uber and others do is an unlicensed/subcontracted taxi service.
That they're not ride sharing services does not make them unlicensed taxi's.
Private car hire where you book someone to drive from x to y location at z time has been a thing for a lot longer than these apps. That's what Uber and others do.
Taxi's can pick up people who hail them at the curb. That's their differentiator from private cars and uber. That's what they have paid licencing fees and bought medallions (depending on area) to be able to do.
Uh, it’s a pretty huge difference. Millions of people live in that kind of wage in the US. It’s the difference between drivers being completely irrational or maybe the gig being worth their while.
Millions of people live in abject poverty too, so what? It’s on par with an entry level fast food job, but a lot more risky given the inherent dangers of spending a lot of time on the road, and with no possibility of advancement. Given that entry level burger flipping is considered the bottom of the barrel, I wouldn’t be too impressed. I think it’s worth fighting for jobs that have a future, the possibility of a living wage, benefits like healthcare, and at least the possibility of advancement don’t you?
Sure, but a lot of these drivers are marginal members of the workforce in some way. I have a friend who is on disability. Lyft is the only job he’s ever been able to hold down, because he can’t show up for work reliably. I think this “abject poverty” framing is very misleading, it assumes the worker is trying to live on their own with the driving gig as their sole source of income, when they are probably living with family or roommates, and/or have another job.
I think Uber and similar have a valuable role in matching a latent supply of labor, an unmet demand for transportation, and wasted resources in the form of cars sitting parked 95% of the time.
It’s not like we were going around paying people $20/hr to drive us home from the bar ten years ago and those jobs went away - that activity simply wasn’t happening (excluding some very rare areas where taxis exist). It would be nice if we could cause Uber drivers to get paid $20/hr with benefits now, but if we passed laws requiring that, the economic activity would probably just go away because most people wouldn’t be willing to pay high enough fares. The driver would be sitting at home on Friday night instead of getting paid to drive the drunk kids around.
> Using Method 1, and following Hall’s advice not to adjust income, Median profit rises to $8.55/hour from the $3.37 initially reported. For 54% of drivers, profit per hour is less than 2016 minimum wage in their state. 8% of drivers lose money.
> Using Method 2, median profit rises to $10/hour. For 41% of drivers, profit per hour is less than 2016 minimum wage in their state. 4% of drivers lose money.
I find it odd that the median is reported so prominently. I'd be far more interested in the mean (though I realize that could be misleading if not weighted by total hours and/or income).
It's also unclear if the minimum wage threshold was naive and equated dollars per hour in profit with the hourly wage number or accounted for things like employer-paid payroll taxes and mandatory insurance (e.g. unemployment, workers comp).
True, but the self-driving unit was only 200 million out of the total 891 million.
Also, in my opinion, they pretty much have to go all-in investing in self driving cars because any market waymo launches in can easily outprice uber/lyft especially considering that while uber has a lot of cash, google literally has an order of magnitude more on hand + they still rake in gobs full of profits from search.
And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
> And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions.
Rain and snow are normal conditions in most of the U.S. Here in NYC (one of Uber's largest markets) it's been raining a lot lately. I don't think a taxi service that doesn't operate in the rain would get much business here. The demand for taxis actually goes up here when it rains.
Also, it can start raining quite suddenly. What do you do if someone is on their way to somewhere in a self-driving car and it starts to rain?
> It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
You'd need somewhere with enough space to park your entire fleet when it's raining or snowing. That would be rather expensive.
Researching it some more led me to an article from October 2017: "Waymo says its cars can handle nighttime driving and light rain, but its cars will be geofenced" [0]. That should handle a decent amount of it but I definitely agree that the whole "what to do mid taxi service if conditions become terrible or where to park the fleet" will still be a thorny problems for some time.
That being said, unless you think self driving cars will never be able to handle 99% of situations, those problems will just cause the self driving car revolution to happen more gradually as they slowly adopt more and more unique situations (which seems to be their current strategy starting with phoenix). During that gradual progression, I just see them slowly eating away at ubers/lyfts market as more markets become locally profitable when they can adapt to the local conditions/economics (and it is not like some other companies self driving tech will be instantly be able to handle more complex situations in a local market that the leader of the market cannot handle)
My unpopular opinion is that Uber is one of the better things to happen to the economy. So many regulations and corporate/government giants stomping out growing businesses basically means that you can align everything perfectly in your startup and still fail. Uber found a loophole and now I get to travel to work without buying a $60k vehicle.
Your wish for Uber to die is elitist and comes from a place of misunderstanding why Uber is a good thing to many, many people, startups and workers alike. Just because you dread the idea of being driven by a taxi driver without a permit doesn't mean I have to as well.
Sorry, i don't live in the US. Just did a rough conversion to make it easier to read. Either way I do not have 5-30 thousand to spend. I also live in a place with really bad public transport.
Ending their self-driving initiative would expose that their business as-is is fundementally unsustainable (it’s clear expensive incentives are required to continually pull new drivers into the driver pool). They have to continue to try to maintain their valuation and funding, at least until IPO (where they can dump it on public investors).
"The company’s self-driving unit continues to be a drain on cash"
Uber should not have a self-driving unit. Self driving cars are only going to be safe to use on infrastructure specifically made and certified for self driving cars. That's going to take massive government investment that probably isn't going to come any time soon. You're only going to see self driving cars in say intentionally created smart cities any time soon.
Waymo have already started testing cars with no backup drivers. They’re years ahead of the competition, even GM are 2-3 years behind Waymo, and Uber is probably more years behind them.
Yeah the article has "...is now starting to test cars in Phoenix with no backup safety driver behind the wheel, something the Jacksons have experienced just once."
Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of business.
Uber has many services in many markets, many of which make money. They are just spending it as fast as they earn it. MoviePass is just one service and it loses money on every customer.
The main reason is unit economics. Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. They also need to spend money to market their service to customers once they have paid enough drivers to be available even when customers aren't requesting uber fares.
If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees.
TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining.
Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.
>Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers.
Is there actually some GAAP-compatible (hopefully audited) document outlining this, or is it purely self-declared?
Considering they are a private company and I don't work for them, no. There are 2 articles (probably same source) that you can read though [0, 1]. Also, while VC's scattershot their investments, I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS in a company that wasn't unit economically profitable in local markets [2].
I assumed they weren’t really profitable anywhere and that they were (recently) waiting for self driving cars to make the business model work and explode!
Looks like 8.3 of that is "Secondary market", which, IIUC, is old investors selling to new ones. This would explain why there are two Dec 28, 2017 rounds listed with different dollar amounts and the same lead investor. In fact, SoftBank is listed as the only investor for the non-secondary round on that date.
Still, that's 13.4 billion dollars of actual new cash (and 3 very recent line items have no dollar values attached, meaning it could be significantly more), so your point stands.
> I highly highly doubt they pumped 21.7 BILLION FUCKING DOLLARS
There's the legend about the Texas oilman who, wanting to distract his competitors, started a rumor that oil'd been found in hell. This worked for a bit, but eventually he heard the rumor enough times himself that he had to go check out hell for himself.
I personally wouldn't be shocked to find out Uber never ends up really working as a business. Investors are herd animals, and hate missing out on a hot deal. By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked. But we now know it was a fraud, and not even a very good one.
It's very hard to know if the unit economics for Uber work because there are a lot of things muddying the picture. Uber doesn't own the cars or employ the drivers, so capital costs and expenses are mostly on other people's books. Uber is getting a massive subsidy from investors, but it could also be argued that it's getting a massive subsidy from desperate and/or optimistic drivers who aren't properly valuing their cars, their time, their sanity, or their health. Uber is definitely getting a subsidy from society: they're creating large externalities in terms of pollution, congestion, and carbon emissions. And probably also in terms of short- and long-term draws on the social safety net. Over time, things tend to be properly priced, so Uber's unit economics will likely get worse. We just don't know how much worse.
And even if the unit economics end up being positive, Uber has a lot of investors who expect a return. Given that they have a very shallow moat, will they be able to throw off enough profit to satisfy shareholders without competitors coming in and undercutting them? If they're going to give the same kind of return on capital as Apple, I'd guess that will take $1-2/ride on its own. That could be quite an advantage for a scrappy competitor.
> I personally wouldn't be shocked to find out Uber never ends up really working as a business.
My other comment in this thread [0] is about how I think waymo has a good chance of eating all of ubers/lyfts market so I totally agree. However, I still think their current unit economics in established markets are profitable and I can see why investors are interested in the market assuming self driving cars do not work out (which i personally don't).
> By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked.
I thought up about this a while and I have to agree with you, they could certainly be pulling a theranos or enron especially since they are not public companies which require regular audits (that I know of but I'm not finance guy).
That being said, with more private money being invested in a company, I would assume they would do more personal auditing. Are there any VC guys that can comment?
Honestly, I don't even thing they have to be pulling an intentional fraud, although clearly given Uber's corporate ethics it wouldn't be beyond plausibility. I think they just have to be selling the dream of future profits. "Sure, unit economics aren't in the black now, because like every startup we're working to capture market share. But once things settle down and we are the dominant player we'll be able to raise prices well above costs. Then we'll be minting money like Google or Apple."
If that's their line, then extraordinary losses are just more proof of how big they'll be in the end. Transportation is a big market, so they'll have to spend big to become the dominant player. Then throw in a lot of waffle about how cars as assets are underutilized, the shift to a service model is inevitable, and robot cars are the future that Uber will also own, but with no pesky drivers to pay.
Please don't use allcaps for emphasis here, which is basically online yelling. This is in the guidelines: https://news.ycombinator.com/newsguidelines.html. Your comments were just fine without that!
The site has a culture that has developed and been refined over 10+ years. The people who have the best time here are those who seek to respect and improve it, and are gracious when reminded what's expected.
Can you point to any reference that mentions the profitablity in established markets? All the articles I see say that unit economics remain unprofitable in all cases.
From sources familiar with Uber finances, I have heard they are indeed profitable in many established markets, but in all of these markets the only reason they are profitable is high-margin products like Uber Black. If governments start requiring a certain amount of Uber's business to be carpooling to reduce traffic etc., Uber will not be profitable anywhere.
> Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month
Actually, it's worse than that - in almost all areas of the US it was cheaper than even a SINGLE movie. I live in a smallish town with cheap cost of living, and a movie ticket here is $11.20 or so (Like $10.50+tax), vs $9.99 MoviePass
Also, you basically never need to go to the cinema to see a movie. On an almost daily basis, you need transportation in the same way that you need food and shelter.
This is very small money to be invested to dismantle all the protections organized labor achieved in the last hundred plus years. I must congratulate the investors. Maybe it didn't start that way but certainly now this is now what it is.
Unfortunately this is true. I think this is a textbook example of where conflating interests are able to effectively push through regressive ideas without some dark room conspiracy.
It's actually quite brilliant: An innovative looking Silicon Valley startup that provides a concrete lifestyle improvement for the upper middle-class under a thin veil of inevitable technological progress.
1. Seems innovative, progressive, and aligned with currents of the time.
2. Got influential supporters through concrete life-style improvements for them.
3. Got a cover story that carries an unspoken threat of being a technophobe.
Not to mention the blatant euphemism "the sharing economy".
An example of where 2. becomes extra visible is when ex-employees of Uber rightfully criticizes the toxic leadership that's spread throughout the company, but is at the same time seemingly oblivious to the fact that Uber's business model is fundamentally reactionary for the working class and that this has been called out, albeit without an audience, for a long time.
If the vcs stop pumping bil/year, will Uber exist?
I don't care about Uber or the Taxi industry, I am trying to point out that better replaces existing, and so far, that hasn't happened in the case of Uber.
Except for the entire planet getting some free rides, that part is awesome.
They can't just jettison the self-driving unit because that torpedos their long-time valuation strategy. Of course, their car doesn't work so they will eventually have to shut it down. That leaves them in the same place I've always said that Uber would end up: a radically smaller company retrenched in existing, profitable markets. Softbank will take a bath and the smart money already exited.
70 comments
[ 3.5 ms ] story [ 141 ms ] threadI wonder if a downturn will be what it takes for Uber to finally die.
Uber and other ride sharing services are so much better than taxis, why would you want them to die? Uber's international support is amazing and has made international travel far more safe and convenient.
What Uber and others do is an unlicensed/subcontracted taxi service.
it's sharing a car as opposed to everyone buying and owning their own.
#facepalm
Private car hire where you book someone to drive from x to y location at z time has been a thing for a lot longer than these apps. That's what Uber and others do.
Taxi's can pick up people who hail them at the curb. That's their differentiator from private cars and uber. That's what they have paid licencing fees and bought medallions (depending on area) to be able to do.
I think Uber and similar have a valuable role in matching a latent supply of labor, an unmet demand for transportation, and wasted resources in the form of cars sitting parked 95% of the time.
It’s not like we were going around paying people $20/hr to drive us home from the bar ten years ago and those jobs went away - that activity simply wasn’t happening (excluding some very rare areas where taxis exist). It would be nice if we could cause Uber drivers to get paid $20/hr with benefits now, but if we passed laws requiring that, the economic activity would probably just go away because most people wouldn’t be willing to pay high enough fares. The driver would be sitting at home on Friday night instead of getting paid to drive the drunk kids around.
Link to the PDF of the revision comment: http://ceepr.mit.edu/files/papers/2018-005%20Authors%20State...
> Using Method 1, and following Hall’s advice not to adjust income, Median profit rises to $8.55/hour from the $3.37 initially reported. For 54% of drivers, profit per hour is less than 2016 minimum wage in their state. 8% of drivers lose money.
> Using Method 2, median profit rises to $10/hour. For 41% of drivers, profit per hour is less than 2016 minimum wage in their state. 4% of drivers lose money.
I find it odd that the median is reported so prominently. I'd be far more interested in the mean (though I realize that could be misleading if not weighted by total hours and/or income).
It's also unclear if the minimum wage threshold was naive and equated dollars per hour in profit with the hourly wage number or accounted for things like employer-paid payroll taxes and mandatory insurance (e.g. unemployment, workers comp).
Also, in my opinion, they pretty much have to go all-in investing in self driving cars because any market waymo launches in can easily outprice uber/lyft especially considering that while uber has a lot of cash, google literally has an order of magnitude more on hand + they still rake in gobs full of profits from search.
And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
Rain and snow are normal conditions in most of the U.S. Here in NYC (one of Uber's largest markets) it's been raining a lot lately. I don't think a taxi service that doesn't operate in the rain would get much business here. The demand for taxis actually goes up here when it rains.
Also, it can start raining quite suddenly. What do you do if someone is on their way to somewhere in a self-driving car and it starts to rain?
> It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
You'd need somewhere with enough space to park your entire fleet when it's raining or snowing. That would be rather expensive.
Researching it some more led me to an article from October 2017: "Waymo says its cars can handle nighttime driving and light rain, but its cars will be geofenced" [0]. That should handle a decent amount of it but I definitely agree that the whole "what to do mid taxi service if conditions become terrible or where to park the fleet" will still be a thorny problems for some time.
That being said, unless you think self driving cars will never be able to handle 99% of situations, those problems will just cause the self driving car revolution to happen more gradually as they slowly adopt more and more unique situations (which seems to be their current strategy starting with phoenix). During that gradual progression, I just see them slowly eating away at ubers/lyfts market as more markets become locally profitable when they can adapt to the local conditions/economics (and it is not like some other companies self driving tech will be instantly be able to handle more complex situations in a local market that the leader of the market cannot handle)
[0]: https://arstechnica.com/cars/2017/10/5-things-we-learned-fro...
Your wish for Uber to die is elitist and comes from a place of misunderstanding why Uber is a good thing to many, many people, startups and workers alike. Just because you dread the idea of being driven by a taxi driver without a permit doesn't mean I have to as well.
Why on earth do you need a $60k vehicle? That’s exorbitant if you’re just trying to “get to work”. 60k is a luxury joy ride, not a commuter beater.
What’s Uber going to do, shed their self-driving unit? Their only hope for profitability?
[0] https://www.bloomberg.com/news/articles/2018-08-15/uber-ceo-...
Uber should not have a self-driving unit. Self driving cars are only going to be safe to use on infrastructure specifically made and certified for self driving cars. That's going to take massive government investment that probably isn't going to come any time soon. You're only going to see self driving cars in say intentionally created smart cities any time soon.
https://www.theinformation.com/articles/waymos-big-ambitions...
At this point in time there are no driverless cars.
Still see the google robocars on a regular basis -- which, BTW, are horrible freeway drivers.
If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees.
TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining.
Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.
Is there actually some GAAP-compatible (hopefully audited) document outlining this, or is it purely self-declared?
[0]: https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b...
[1]: http://fortune.com/2016/06/16/uber-profitable-markets/
[2]: https://www.crunchbase.com/organization/uber#section-funding...
Looks like 8.3 of that is "Secondary market", which, IIUC, is old investors selling to new ones. This would explain why there are two Dec 28, 2017 rounds listed with different dollar amounts and the same lead investor. In fact, SoftBank is listed as the only investor for the non-secondary round on that date.
Still, that's 13.4 billion dollars of actual new cash (and 3 very recent line items have no dollar values attached, meaning it could be significantly more), so your point stands.
There's the legend about the Texas oilman who, wanting to distract his competitors, started a rumor that oil'd been found in hell. This worked for a bit, but eventually he heard the rumor enough times himself that he had to go check out hell for himself.
I personally wouldn't be shocked to find out Uber never ends up really working as a business. Investors are herd animals, and hate missing out on a hot deal. By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked. But we now know it was a fraud, and not even a very good one.
It's very hard to know if the unit economics for Uber work because there are a lot of things muddying the picture. Uber doesn't own the cars or employ the drivers, so capital costs and expenses are mostly on other people's books. Uber is getting a massive subsidy from investors, but it could also be argued that it's getting a massive subsidy from desperate and/or optimistic drivers who aren't properly valuing their cars, their time, their sanity, or their health. Uber is definitely getting a subsidy from society: they're creating large externalities in terms of pollution, congestion, and carbon emissions. And probably also in terms of short- and long-term draws on the social safety net. Over time, things tend to be properly priced, so Uber's unit economics will likely get worse. We just don't know how much worse.
And even if the unit economics end up being positive, Uber has a lot of investors who expect a return. Given that they have a very shallow moat, will they be able to throw off enough profit to satisfy shareholders without competitors coming in and undercutting them? If they're going to give the same kind of return on capital as Apple, I'd guess that will take $1-2/ride on its own. That could be quite an advantage for a scrappy competitor.
My other comment in this thread [0] is about how I think waymo has a good chance of eating all of ubers/lyfts market so I totally agree. However, I still think their current unit economics in established markets are profitable and I can see why investors are interested in the market assuming self driving cars do not work out (which i personally don't).
> By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked.
I thought up about this a while and I have to agree with you, they could certainly be pulling a theranos or enron especially since they are not public companies which require regular audits (that I know of but I'm not finance guy).
That being said, with more private money being invested in a company, I would assume they would do more personal auditing. Are there any VC guys that can comment?
[0]: https://news.ycombinator.com/item?id=17791520
Honestly, I don't even thing they have to be pulling an intentional fraud, although clearly given Uber's corporate ethics it wouldn't be beyond plausibility. I think they just have to be selling the dream of future profits. "Sure, unit economics aren't in the black now, because like every startup we're working to capture market share. But once things settle down and we are the dominant player we'll be able to raise prices well above costs. Then we'll be minting money like Google or Apple."
If that's their line, then extraordinary losses are just more proof of how big they'll be in the end. Transportation is a big market, so they'll have to spend big to become the dominant player. Then throw in a lot of waffle about how cars as assets are underutilized, the shift to a service model is inevitable, and robot cars are the future that Uber will also own, but with no pesky drivers to pay.
Also, did you really just auto-hide my comment for using allcaps on 3 words?
[1]: http://fortune.com/2016/06/16/uber-profitable-markets/
Actually, it's worse than that - in almost all areas of the US it was cheaper than even a SINGLE movie. I live in a smallish town with cheap cost of living, and a movie ticket here is $11.20 or so (Like $10.50+tax), vs $9.99 MoviePass
It's actually quite brilliant: An innovative looking Silicon Valley startup that provides a concrete lifestyle improvement for the upper middle-class under a thin veil of inevitable technological progress.
1. Seems innovative, progressive, and aligned with currents of the time.
2. Got influential supporters through concrete life-style improvements for them.
3. Got a cover story that carries an unspoken threat of being a technophobe.
Not to mention the blatant euphemism "the sharing economy".
An example of where 2. becomes extra visible is when ex-employees of Uber rightfully criticizes the toxic leadership that's spread throughout the company, but is at the same time seemingly oblivious to the fact that Uber's business model is fundamentally reactionary for the working class and that this has been called out, albeit without an audience, for a long time.
So, did they succeed? Are cabbies dismantled now?
If the vcs stop pumping bil/year, will Uber exist?
I don't care about Uber or the Taxi industry, I am trying to point out that better replaces existing, and so far, that hasn't happened in the case of Uber.
Except for the entire planet getting some free rides, that part is awesome.