>The payout on one of the most richly-funded bets of the past decade or so revolves around whether ride-sharing and delivery firms—which once were part of something known as the “sharing economy” but are better described as the “flywheel economy”—can actually ever live up to their heady promise. The outcome will matter to more than just venture capitalists who backed their growth. Whether these flywheels do gather unstoppable momentum is also of interest to regulators worried about technology’s propensity for winner-takes-all business models, not to mention paid-by-the-gig workers caught in its cogs.
Yaawn another one of these "{insert successful company name here} is not unsustainable because of blahv blahh blah" articles. In spite of endless negative media coverage, Uber is still valued at over $50 billion. I remember all the endless articles from 2012-2018 about all the debt Uber had and how it was not sustinable. If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Almost anyone, individual or hedge fund, can stand to profit from the inability of Uber and Doordash to keep defying 'the laws of capitalism'.
"the market can remain irrational longer than... " you know the rest.
A high market cap does not invalidate any argument. Enron was highly valued, real estate funds were highly valued, Theranos was highly valued, etc... until they weren't.
Massive wealth consolidation leads to huge piles of capital that are itching to invest in ventures, which leads to entrepreneurs sprouting up to pitch ideas for a piece of the pie. To get the most enthusiastic investments, they don't bother building a productive company but instead pitch dazzling tech startups that operate at a massive loss in order to disrupt and grow to critical user mass, in order to replace a legacy market with a proprietary platform and thus enable indefinite rent-seeking for growth-obsessed investors. The "flywheel" tech companies aren't the point, getting hands on venture capital is the point.
That sounds like good old normal capitalism as I understand it.
Capitalism should be defined by free markets, among other things.
What we are seeing is an unprecedented combination of quasi-monopolies, rent-seeking, and an economy disconnected from real production of goods and services.
Unfortunately "capitalism" is a pretty ill-defined term. I wouldn't include "rent-seeking" as a characteristic of "capitalism" but apparently you do.
This makes it very difficult to have coherent discussions. For what it is worth, I think "rent-seeking" is probably a characteristic of all economic systems and therefore isn't something peculiar to "capitalism" and so shouldn't be used as a criticism of "capitalism".
Rent-seeking isn't a phenomena that is unique to capitalism. It is something present in many different (all?) economic systems. So while it is completely fair to be critical of rent-seeking that isn't by itself a criticism of capitalism.
This may be a hot take, but I think the gig economy is one thing which could be a pretty solid use of the blockchain.
Uber/DoorDash/Lyft are all pretty simple CRUD apps at their core, and the companies themselves do very little actual work. Unfortunately, due to the Silicon Valley cult of growth, they are still either unprofitable or barely profitable while also taking a pretty massive cut away from actual workers on the ground. Restaurants are stuck with them due to vendor lock-in, and they have to cut their margins or raise prices as a result. The consumer loses, the drivers lose, and the restaurants lose.
Most of the functions of the main delivery platforms could easily be achieved through smart contracts, and then drivers would act as owner-operators instead of "independent contractors". They would also be able to get 100% of the fees associated with the delivery.
The companies exist because there’s a value in a middle-man handling things like vetting drivers, tax and regulatory compliance, and handling disputes like “my food is partially eaten”.
You could use the blockchain in some ways, but I don’t see how the companies themselves could be easily replaced.
It would serve as a neutral platform on which clients could be built though. Like instead of a restaurant listing on the existing apps, they'd list their menus on the blockchain and third party clients could exist and race-for-the-bottom in terms of fees. It's like the difference between Twitter and Email
Or a normal database. There are a few worker coops trying to do just this without the waste of everything that comes with the blockchain. Co-op Ride is an example of a driver's coop that's competing with Uber in NYC.
Could you please outline clearly how blockchain wil be used in your example? Like what kind of information are stored on the blockchain, how smart contracts are utilized, how do drivers and consumers interact with the system?
“Are all pretty simple crud application at their core”. No. Really no. Your understanding of the complexity of these applications and what they do invalidate everything else you try to pitch.
Regarding Lyft and Uber, they are not just CRUD apps in the technology.
There is a lot of technical work behind the scenes whenever there is payment involved and whenever there is real time matching between two changing positions that also needs efficient routing for the matched driver to arrive in under 5 minutes.
Customers don't care about the block chain yadda-yadda. The value these companies provide is the uniform and optimized (well, at least for the average) user experience.
Users don't install apps and a lot of startups (or just app developers) don't get it. Yes, users on average they will have quite a few apps on their phones (lets say ~100ish), but there are millions of apps out there. And most users will just have one app per (most) category. Not only because it's inconvenient to go and install that new app and then register and maybe enter your card details (if you don't have google or apple pay), but because it's just easier to think "food => DoorDash" (or Wolt, or FoodPanda, etc.), "taxi => Uber" (or Bolt or maybe your local taxi company), "ride => Lime", "search => google", etc.
And once you have a lot of customers, the rest is simple. (Getting a lot of customers is hard and, of course, can't happen without building the other side of the business, but that's not the point.) If it wasn't for this, there would be competing delivery companies, multiple per cities, not just one, maybe two.
I was expecting a data driven argument but the bits of data shared actually contradict the author. These companies mentioned are collectively worth $500B, after taking $100B in venture capital. They are starting to get profitable. Demand for their services is increasing.
This article is thousands of words of the exact same talking points we have been hearing for a decade. What's the "after all" part?
I don't know what you are basing this on but it's definitely not based on data.
$UBER EPS over the last few quarters:
-1.28 0.61 -0.06 -0.54 -0.62
$DASH EPS
-0.30 -0.34 -2.67
The only way they are getting profitable is on an "adjusted basis", in other words when they exclude most of their expenses. That's not a business, that's a game.
> Actually, I think a lot of businesses are just that.
Can you explain what you mean by that? People often say this and I never really understand what they mean. Most businesses which aren't unicorns just sell stuff for money. What's a ponzi scheme about it?
I also think calling these startups ponzi schemes is disingenuous. They are not lying about anything - they're offering a very clear, risky bet to people, which some people are taking up. That's their choice. (If they are lying or committing fraud, then obviously that's a different story).
I've known several entrepreneurs in my life that simply lived off investor money and never really got anything out the door.
They would come up with a new idea, get money, and then botch the execution, over and over.
I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding.
In the end, both examples didn't really mind if the business failed, because they already got their massive paycheck from it. To me, that's some sort of legal ponzi scheme.
I mean, those are bad investment that those investors probably shouldn't have made. But that's really on the investors, unless the founders were somehow lying about what they were doing.
> I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding.
Just as an example, founders don't cash out without the investors knowing about it. It's a negotiation in which the investors knowingly decide that it's worth paying millions to founders in order to get a piece of the company.
That might be wrong! It might be a bad investment. But it is in no way fraud, and there is no reason at all to feel bad for those investors - we're not even talking about retail investors, we're talking about investors who pay lawyers and accountants 10s of thousands to do due diligence on companies, and who negotiate for a living.
That is nothing at all like a ponzi scheme (again, unless someone is lying somewhere along the way / committing fraud).
Yeah, I guess I don't mean that my examples are explicit ponzi schemes, but merely similar.
I certainly wouldn't say they are fraud.
I think my examples are instances where people are good at selling an idea and not having full intention of executing well after receiving financing.
I'm certain that some percentage of entrepreneurs actively think "If I can just sell my idea to investors, I can get rich regardless of whether the idea works or not." That's my ponzi scheme analog.
Could you please stop posting flamebait and/or unsubstantive comments to HN? You've been doing it repeatedly, unfortunately, and it goes against what we're trying for here.
I genuinely thought it would spark an interesting discussion about how certain businesses are run, that is related to this article.
Can you please clarify what is wrong with that exactly?
I've been a part of this site for like 10 years, and I think that any site that invites public comments is bound to have controversial topics come up. Further, I do my damn best to be respectful on this website, so your blanket characterization of my comments is unfair.
It's just that the comment was a generic, shallow dismissal with no actual information in it. Also arguably name-calling, since "ponzi scheme" has morphed a pretty generic pejorative.
I appreciate that you put effort into being respectful on this website! That of course counts for a lot, in fact it's the most important thing. It's just that generic/unsubstantive comments are a separate issue.
If you are dumping to own the market as a monopoly, and so is your competitor, and both of you are buoyed up by seemingly limitless investor finance, then all that happens is that investors' money moves into the customers' pockets.
If pervious economies were so well functioning, why couldn't I easily order pretty much any food from any restaurant within a 50 mile radius with a click of a button before Uber and DoorDash came along?
An efficient economy doesn't mean you can do anything you can imagine is technically possible; it means that market rates with everything priced in properly will discover whether or not enough people value it enough to pay for it.
Because those economies functioned in a relatively closed system of finance, and the actual cost of delivery was covered within that system. The actual cost of delivery is reflected in the price of getting the delivery. Or, if no delivery was easily available, it was because the cost of keeping such a system up, running, and easily available was higher than could be managed profitably.
Doordash works today because venture capitalists are throwing millions of dollars at it, and dramatically subsidizing the cost of the delivery.
In other words, you can do that today because someone else is willing to pay. The VC's money won't last forever though. The question is if the economies of scale it creates will be enough to reduce the cost of delivery such that it is a sustainable business.
- delivery was under-served and over-priced, and taxis charged too much, often because of viciously expensive auctions for limited legal taxicab slots, with the city raking it in and the drivers having to recoup it from fares
- Uber and friends are exploitative dumping schemes that tighten the screws on their gig workers even while they firehose money at customers
I don't know what fantasy well-functioning economy you are taking about. You had to manually call a taxi company, and wait for an hour for a taxi that might now even show up.
I have been thinking about this every now and then - I, and many others, hold no loyalty to any particular ride sharing or food delivery app, and the cost to switch to the one that is offering deep discounts is almost zero. I know people who are constantly exploiting these sign up offers across many businesses that are pulling the same sort of ridiculous discounting that Uber pulled - and therefore are effectively living off investor cash.
I've always wondered what the extreme end of this could look like. It seems like here in London companies in this same area are popping up almost weekly in areas like grocery delivery, food delivery, ride-sharing, etc, and they almost all have absolutely crazy initial sign up discounts. I suspect there is an entire class of people that are effectively taking advantage of this and I wonder how much they manage to save.
I suspect it's a not trivial amount of money. this reminds me of the San Francisco subsidy (the ability of people living in San Francisco to utilize a venture capital back startup for almost every aspect of their life at a tremendous discount) from a couple of years ago, anecdotally living expenses can be reduced by nearly 30%
A core aspect seems to come at the end as a tossed in aside but gets disappointingly little consideration:
>Real business flywheels do exist. Software makers have managed to lock users in and thus generate gross margins typically above 70%.
No, it's not just "lock in" it's the magic of minimal to zero marginal cost, near zero "stocking" cost, instantaneous reaction to demand, etc. Software and digital services firms face dramatically different scaling curves than traditional physical products/services. That they also in turn have been able to continuously add in ways not limited by IRL physical constraints and experience real network effects certainly helps, but I suspect one of the big foundational issues for a lot of these valuations is people naively applying software business lessons to businesses based around hardware and real world physical human interactions. It doesn't cleanly translate though, they aren't the same thing.
The only way to consistently have margins above 70% is a strong lock in effect. All the other reasons who listed don't matter when a venture capitalist with a couple billion dollars can come in and rebuild the software. At 70% margins they absolutely would do that. The reason they don't is because consumers wouldn't actually switch to their product, even if it is cheaper, because they're already locked in.
Real software or even content have minimal marginal costs...
But these gig-economies clearly aren't software or content. And they have very real minimum price. And not even robotaxis will fix that. Just because you make software doesn't mean you are such tech company, see WeWork...
One thing to note is that every piece of software is born with a government-granted monopoly (copyright title) around itself. This monopoly is strengthened by the fact that software has strong dependencies that don't exist for other kinds of creative works. You can't buy and run a Windows app without also buying and running Windows[0] - there really isn't an analogue to this in other forms of creative media. If you ran any other kind of business with the same level of monopolistic zeal as a software company does, you would almost certainly be in violation of antitrust law.
[0] Yes I know WINE exists. It doesn't really affect the argument here; the fact that it's legal to reimplement APIs merely puts upper bounds on the size of the software monopoly. And those bounds are really high - reimplementation is far more difficult than just, say, pirating Windows.
All of these companies may have a functional business and can stick around, but they are not worth the valuation present in their stock. Even Tesla is not worth anywhere near $1T. In the end you have to eventually earn enough to support the price (once all the Fed support goes away from the market) but none of these companies will ever make enough revenue or profit.
Tesla is profitable. The profit is propped up a bit by subsidies, but it seems strange to include the company in a discussion about service providers that are battling in a war of attrition.
Does this mean that Tesla would have a smaller profit margin without subsidies, or that Tesla would not be profitable in real terms without the subsidies?
Both. People would purchase fewer teslas without the tax credit and Tesla would have less income without the ability to trade their tax credits to “dirtier” manufacturers.
Sure this is all coupled; But I was trying to separate "propped up a bit" from "pretty dependent on". It's not really clear without having looked into the details.
> However, Jonas said Morgan Stanley clients also noted the company’s larger addressable market, and an opportunity to dominate the internet-of-cars market as other possible factors built into its valuation.
Ah yes, the internet-of-cars market. It would be very wise and lucrative to dominate there.
Yeah; the ink spilled on "IoV" (Internet of Vehicles) is...hilariously bad. And even if you assume there's something there, Tesla doesn't seem well prepared to dominate it, since all of the use cases assume every car is connected. Maybe I missed it, but I haven't seen Tesla seeking to write software for other manufacturers, nor seeking to create RFCs or similar collaborative methods for ensuring a standard that would connect all vehicles.
You can be profitable and also wildly overvalued. If I invest $50 million for a 50% stake in my neighbour's kids' lemonade stand it's very unlikely to be a reasonable valuation regardless of their gross margin.
Platform economy can create huge profits if you can lock in the markets. Create moat that keeps competition away.
Uber, DoorDash have none of that.
Uber's global brand recognition can help with tourists and business travelers who just want familiar, but they are small fraction of the market Uber needs to lock in to justify their market cap. Uber is not like Amazon with returns to scale.
Ultimately you can NOT "magically" negate "Last Mile Costs" in cities and towns where the Last Mile path distance is enormous.
Did my MBA thesis on this subject with the benefit of 20 years of engineering experience. The numbers simply do not work unless you change how cities and residences are built, which would cost far more than you'd ever gain from solving Last Mile costs - the breakeven time is of the order of 100-200 years!
The VERY WORST are US-style suburbs. The best would be Asian-style urban - which NO US CITY is other than some parts of Manhattan.
What do you think about last mile delivery robots? https://www.kiwibot.com These little bots don't require the same level of human physical presence as Uber or DoorDash.
Agree! If actual human doordash and instacart delivery people can't read the sign or follow instructions to determine our house from the inlaw apartment, I doubt any robot is going to be able to get it done.
They faked the bots. They require human physical presence, and a remote controller.
> The Kiwibots do not figure out their own routes. Instead, people in Colombia, the home country of Chavez and his two co-founders, plot “waypoints” for the bots to follow, sending them instructions every five to 10 seconds on where to go.
> On the ground in Berkeley, people also do a lot of robot support. Traveling at 1 to 1½ mph, the bots would take too long to chug to local restaurants, so Kiwi workers pick up the food at restaurants and take it via bikes or scooters to meeting spots around campus to insert into an insulated bag in the bots’ storage compartment.
> The average distance a robot covers for a delivery is about 200 meters (656 feet, or one-eighth of a mile) which makes them fall short of a “last-mile” solution.
They know that the path finding algorithm isn't the important part right now. The most important thing is proving that the robots can provide the service.
These types of path finding algorithms already exist, so it's just a matter of automating and improving margins.
If there was any time to be skeptical of Uber's longevity, it is now (at least for me).
My experience is anecdotal but I visit my home country every year for a few months and I can clearly notice the declining quality of Uber's services:
1. Vehicles, on average, take at least 10-15 mins longer to get
2. Even if you find a vehicle, 60% of these rides are canceled (either by the driver because they call me and find out they don't want to go that way or they just don't move at all and I'm forced to cancel)
3. After all this, if I am lucky to get into a commute, every driver has complaints about Uber (complaints include intransparent pricing, delays in payments). Most of these drivers are completely dependent on Uber or similar services and have heavy debts that they are now unable to service.
4. Uber's app itself appears to get bloated by the day and while they do appear to make an effort collect my feedback when rides get canceled, not once have I got an impression that the feedback matters at all. Additionally, payment options are numerous but they require me to complete multiple steps to finish which puts me off using it (not Uber's fault I suppose but is part of the riding experience).
Given that they are competing against flag-down autos and rides, not to mention public transport and private vehicles (as electric bikes and cars get more popular), I think their model is not sustainable anymore and I expect them to struggle further as riders withdraw and once the demand-supply gap grows further, it's a downward spiral.
I think they mean it is sort of a ponzi scheme for those invested. It requires more and more investor money to operate and will eventually collapse leaving the last round of investors holding the bag while those that got in early may get out fine. I think the ponzi scheme is more an apt metaphor than the actual structure of the company?
A Ponzi scheme requires an element of fraud. Very difficult to tell me that building a global fleet of ride hailing and being transparent with the financials is a Ponzi scheme. The outcome might be similar (later investors bearing most of the losses) but that's more of an investor problem and not fraud.
They probably mean a Pyramid scheme. In regular use, Ponzi and Pyramid schemes are interchangeable terms because you need new money to stay afloat. Legally they're different because a Ponzi scheme requires lying about where the returns are coming from, but a Pyramid scheme can be entirely truthful about the finances.
Pyramid scheme is system where income is derived from recruitment of new investors. Ponzi scheme is centralized system where profits of old ones is paid with money of new ones.
VC start-up burning money to make things or subsidise customers in attempt to acquire them is neither.
I'm really starting to hate when these terms that have rather specific and well understood meanings are thrown at anything. If you want to call it something just say it is big scam. Scam really could be anything. Not specific thing.
It seems plausible that those leading the company thought there was no chance to turn a profit but we'll never really know. They have a vested interest in saying "everything is going great and the future looks great" no matter what.
No, according to the latest report, rides have been profitable[0] (@ +544M in the last quarter). Deliveries are still in the red, but only barely (@ -12M, up from -183M from previous quarter). "Losses" largely come from G&A/R&D.
That's just creative accounting. Uber actually incurred a $2B loss, but for some reason they insist on ignoring expenses when calculating their "profits".
The 2B "loss" was a downswing of Didi stock, which Uber has a big stake on; AFAIK Uber didn't actually liquidate that position, so it's more of a paper money loss. See [0]
As for "creative accounting", pretty much everyone in this industry segment uses EBITDA. That's the language investors and media use to talk about earnings calls for not just Uber, but also Lyft, Doordash, etc. If you want to make a case for why GAP analysis would make more sense vs EBITDA given the maturity of the industry, I suppose a more elaborated argument is in order?
I agree with the gist of you're saying, and I didn't personally dig into their last few fillings, but I suppose what the parent comment is trying to express can also be stated as "Uber's core ride-sharing business model is not cash flow positive", which can be obfuscated when arguing GAP vs EBITDA.
Yeah, I get the insinuation and I'm responding to that: ignoring for a moment the thing about the proper definition of a ponzi scheme (sibling threads already go into that), the claim is more or less that Uber's business model bleeds cash unsustainably on core verticals to capture investor endearment, but that cash is limited and the party has to come to an end.
What I'm pointing out is that a) the argument about "duping investors" doesn't really make any sense anymore now that Uber is a public company (since raising VC rounds by giving them paper equity is no longer really a thing), b) the balance sheet numbers have been trending towards positive cash flow (and fairly aggressively, at that), even despite a pandemic that could accurately be described as the worst thing that could possibly happen in this industry segment and c) the core vertical (rides) is actually cash flow positive and funding other parts of the business.
Thank you for the informative reply. I definitely agree on all counts, especially re "ponzy" etc.
I think that the pandemic forced the entire sector to focus on profitability and cut most loss-leading initiatives, so hearing they're trending towards core profitability makes sense!
Just to be clear, Uber has never been profitable even on an EBITDA basis. This right here says -$0.9 billion for the last quarter: https://www.macrotrends.net/stocks/charts/UBER/uber-technolo.... They use "Adjusted EBITDA" to try and say they're profitable, which is an attempt to remove non-recurring expenses. That is perfectly fair if they're really non-recurring, but it's also perfectly fair to be skeptical when there have been exactly zero quarters in over a decade now in which they have brought in revenue in excess of their expenses, even if they claim those expenses were unexpected.
I'll admit, I should've checked their Q3 numbers before, regarding the write-off, but they're nowhere near profitability even if you ignore that.
For example, in the table linked above, they've accounted for all revenues, but not attributed all of their expenses by segment. According to their filing their total loss from operations across all segments was $572M, however if you add up all their segments in the table, they come out to a $8M profit. That's what bothers me. If a company has 3 segments that generate 100% of its revenue, how can it claim that $600M in operating expenses shouldn't be attributed to any of those segments, thus making one of those segments profitable.
I think everybody in the industry segment uses the same sketchy metrics because they are also terribly unprofitable.
Yeah, that's actually a pretty good point. Personally, I don't really pay that much attention to profitability of individual verticals because I hold similar opinions on cost attribution, but then again, I'm no accounting expert, so I don't know if my opinions are actually correct.
I think the narrative people are pushing about bleeding money on every ride is too simplistic though. I could definitely get behind an argument that, for example, driver incentives ought to be bucketed under mobility, but on the other hand, attributing a Didi valuation fluctuation to a business vertical is obviously silly. Personally, I'm not convinced that there are enough "hidden" losses in misc categories that are "rightfully" attributable to mobility to offset the Q3 performance, and my understanding is that many analysts are bullish on Uber right now because they see the trend in these metrics, adjusted as the metrics may be. I guess we'll see what happens next year.
For the last time, not everything that's not everything that's a bad financial proposition == ponzi scheme. At what point have new drivers ever paid the wages of old drivers?
Uber drivers have always done ok in the short term, new or old, it's Uber that loses money on every ride. And if the drivers are not coming out ahead long term due to maintenance costs, that's not affecting newer drivers any more than older drivers.
I don't understand why you are going into driver wages. I'm completely fine with their drivers making good money, but if they lose money on every ride, it doesn't sound like a good business.
What makes it a ponzi scheme is that the initial investors and the people that run it knew they couldn't possibly make money and yet they were able to get tons of investors to pour capital into a business that couldn't make money. New investors aka public markets paid out the old investors aka venture capitalists.
It's like this in Tacoma, WA right now. An Uber or Lyft may never arrive. 5-10 cancelled drivers before the car arrives is normal. A notice saying "No cars available" is shown 70-80% of the time for XL size cars. Often it takes 1h or so to get a ride. Sometimes it will come in 4 minutes, sometimes it will say 4 minutes but then 5+ drivers cancel and it takes an hour of real time, while the app just says 4 minutes.
I have come to depend on Lyft and Uber and they are failing me and have been for a long time now. So long that I now plan to get a driver's license and a car. I don't know how else to make it in this world. If you're at a business and it's closing soon, and raining outside, you are likely to be outside in the cold and rain for 30 minutes waiting for a car.
It's ridiculous. I'm giving up and have already booked my written drivers test for WA.
There are places in the world with substantially better transit than Tacoma. It’s always been a pretty difficult place to live without a car, except maybe for a brief period between 2013 and 2021 when Uber was heavily subsidized by VC.
I've been seeing the same thing in Paris. It's gotten very unreliable, often requiring 15+ minutes to get a driver at the very least, and pricing is worse and worse.
I just know that when Uber was charging $60 for a ride to the airport (a couple years ago it was half that), my sister found a way to take transit for $3. This was in Seattle.
Exactly same here, I just started using taxi's for longer trips they don't cost more and I have a price upfront. Most people I know use uber in the city for short trips (but I am from Europe)
There are a number of disadvantages to getting to the airport by LINK, especially if you have heavy bags.
The more apt comparison is calling a cab to take you to the airport. I've never had to wait more than a few minutes at any hour of day or night, and the pricing is equivalent to Uber.
Works great if you’re very near transit or can have someone figure out that last mile for you. Works poorly if you’re not.
I would take public transit where I live but I’m about 1-2 miles from the nearest bus stop that could get me to the airport (too far to walk with checked luggage). No big lots or houses where I live - people crammed in. The bus is unpredictable and runs infrequently and takes a very long route to get to the airport. (1+hr) If I take the train, I have to go even further walking and then I have to pay something like $9 then make a transfer (more time spent) and pay another $6. The time spent is maybe less than the bus but because of transfer - it can be quite slow.
Add in that I’m usually traveling with a partner and I love to get to the airport just as boarding starts and this is a colossal waste of time + money. I pay the $30-35 for a Lyft/Uber and it’s way faster and more reliable. Sometimes cheaper too. It’s like 1/3rd the time spent (20-25min) vs 1.5hr+. Oh and I’m not adding in the unpleasantness of either transit option - just cost and time…
I live in the peninsula of SFBA and go to SFO at least twice a year. Seattle has much better options for SeaTac if you’re in the actual city.
The Greater Seattle area has plenty of "park-n-ride" areas with huge parking lots. For 2 months after taking a new job in Downtown Seattle, I simply drove to a park-n-ride in Bellevue and took the bus to work. The bus was slow but frequent, and for the most part had its dedicated lane so not quite affected by traffic. Plus, you can simply read, listen to music, or just relax on the bus. After that I was able to move into an apartment right next to the bus stop ;)
I live an hour away from the nearest airport. Of course public transit can take me, but it usually would take me anywhere between 2-3 hours if I account for all the transfers I missed. I started using Uber and it charged me about $60, which I found reasonable for a ride that long. In pandemic it became $150-200, and now it still regularly hovers around $120.
I've realized that I can just drive to the airport, pay for long term parking ($13/day) and still come out even with Uber fares for trips as long as 3 weeks. This is something I used to do a decade ago. It's hilarious that we have gone a full circle on this.
Yeah can't defy nothing with this model.
A handful of parasitic wannabe visionaries grabbing as much investor money as fast they can so long the sales pitch sounds ok, meanwhile "disrupting" all laws they can and paying workers less than minimum wage.
Seems like the drivers have wisened up in some places.
From a customer's perspective Uber was always a scheme to me which was great at extracting money from rich and utterly dumb Saudis to compensate our taxi fares in the West.
In Mexico last week an Uber was twice the cost of using inDriver. Our driver reported Uber taking 50% of the fare which is why so many users and drivers had switched to inDriver.
I see these articles every now and then over last 5-10 years, but as someone who has followed/worked around this industry in the past, I can tell you that there is enough demand, supply and capital for this industry and it is not going anywhere.
All of these companies are EBDITA profitable with decent margins and the net loss is them reinvesting in marketing, product and M&A (from their earnings reports). As the effects of covid wanes, their profits are going to go up very quickly which will be seen over the next year.
I live in the Denver metro area and have recently travelled several places. Here in Denver rides are 20-50% more expensive than they were pre-pandemic and it takes noticeably longer to get a ride.
I don't even mind that there are morons out there who think this kind of business model works. Hell, if you're dumb enough to realize that even hyper-competitive companies like Amazon can't make restaurant delivery work, but still want to invest in Doordash, go ahead.
What REALLY gets my goat is how much mental real estate these wannabe entrepreneurs get.
Personally, I joined the tech industry because I was more inspired by the smaller, incremental innovations that generated value. Something like CRT TVs becoming razor thin, or mobile phone cameras overtaking traditional cameras in resolution, or the Apple M1 chip/ARM, THAT was what I used to think of when I thought "Innovation".
However, smart people around me these days, they have no interest in actually doing hard, innovative things. The definition of "smart" today, is actually to raise a bunch of VC money and get a "net worth". And that makes sense, doesn't it? Why work hard, when you can "generate" "billions" of value with just a Powerpoint slide deck?
The end result of all this is that people actually get discouraged from doing the hard work and actually generating real value! Yeah, why should I spend time understanding Supply Chain basics, or studying Operations Research theory? Why should I actually come up with an improved heuristic for Travelling Salesman? Let me just make a shiny Powerpoint, and head on into my first VC meeting.
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[ 5.0 ms ] story [ 207 ms ] threadYaawn another one of these "{insert successful company name here} is not unsustainable because of blahv blahh blah" articles. In spite of endless negative media coverage, Uber is still valued at over $50 billion. I remember all the endless articles from 2012-2018 about all the debt Uber had and how it was not sustinable. If anyone believes that these companies are not sustainable, the opportunity to short them or buy put options on them exists right now. Almost anyone, individual or hedge fund, can stand to profit from the inability of Uber and Doordash to keep defying 'the laws of capitalism'.
Stocks can remain irrational for a long time. This advice is bad for precisely that reason.
A high market cap does not invalidate any argument. Enron was highly valued, real estate funds were highly valued, Theranos was highly valued, etc... until they weren't.
That sounds like good old normal capitalism as I understand it.
Edit: fixed run-on sentence
What we are seeing is an unprecedented combination of quasi-monopolies, rent-seeking, and an economy disconnected from real production of goods and services.
It has been called neofeudalism.
Unfortunately "capitalism" is a pretty ill-defined term. I wouldn't include "rent-seeking" as a characteristic of "capitalism" but apparently you do.
This makes it very difficult to have coherent discussions. For what it is worth, I think "rent-seeking" is probably a characteristic of all economic systems and therefore isn't something peculiar to "capitalism" and so shouldn't be used as a criticism of "capitalism".
According to what theory?
https://en.wikipedia.org/wiki/Rent-seeking fits squarely into capitalism.
Most of the functions of the main delivery platforms could easily be achieved through smart contracts, and then drivers would act as owner-operators instead of "independent contractors". They would also be able to get 100% of the fees associated with the delivery.
You could use the blockchain in some ways, but I don’t see how the companies themselves could be easily replaced.
... or just a database?
Much better to store every menu of every restaurant on thousands of computers and use menu updates to decimate coral reefs.
Why does that need a blockchain? Wouldn't that just be an API?
What?
https://drivers.coop/
> Most of the functions of the main delivery platforms could easily be achieved through smart contracts,
These Crypto conversations always seem to follow the same format:
1. Define a problem, but reduce it to a single, or a few, causes
2. Oversimplify the existing solutions to the problem
3. Propose smart contracts as a solution
4. Hand wave how smart contracts actually contribute to solving the problem
5. Ignore the new problems that smart contracts, and the required market places, would introduce
There is a lot of technical work behind the scenes whenever there is payment involved and whenever there is real time matching between two changing positions that also needs efficient routing for the matched driver to arrive in under 5 minutes.
Users don't install apps and a lot of startups (or just app developers) don't get it. Yes, users on average they will have quite a few apps on their phones (lets say ~100ish), but there are millions of apps out there. And most users will just have one app per (most) category. Not only because it's inconvenient to go and install that new app and then register and maybe enter your card details (if you don't have google or apple pay), but because it's just easier to think "food => DoorDash" (or Wolt, or FoodPanda, etc.), "taxi => Uber" (or Bolt or maybe your local taxi company), "ride => Lime", "search => google", etc.
And once you have a lot of customers, the rest is simple. (Getting a lot of customers is hard and, of course, can't happen without building the other side of the business, but that's not the point.) If it wasn't for this, there would be competing delivery companies, multiple per cities, not just one, maybe two.
This article is thousands of words of the exact same talking points we have been hearing for a decade. What's the "after all" part?
No. They posted an adjusted Q3 profit of $8M, with an actual Q3 loss of $2.4B.
I don't know what you are basing this on but it's definitely not based on data.
$UBER EPS over the last few quarters:
-1.28 0.61 -0.06 -0.54 -0.62
$DASH EPS
-0.30 -0.34 -2.67
The only way they are getting profitable is on an "adjusted basis", in other words when they exclude most of their expenses. That's not a business, that's a game.
Actually, I think a lot of businesses are just that.
If you need 10 rounds of funding to keep running, your profit model is "obtain investor money".
(Probably controversial, but IMO 3 rounds of funding is pretty sus.)
Can you explain what you mean by that? People often say this and I never really understand what they mean. Most businesses which aren't unicorns just sell stuff for money. What's a ponzi scheme about it?
I also think calling these startups ponzi schemes is disingenuous. They are not lying about anything - they're offering a very clear, risky bet to people, which some people are taking up. That's their choice. (If they are lying or committing fraud, then obviously that's a different story).
They would come up with a new idea, get money, and then botch the execution, over and over.
I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding.
In the end, both examples didn't really mind if the business failed, because they already got their massive paycheck from it. To me, that's some sort of legal ponzi scheme.
> I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding.
Just as an example, founders don't cash out without the investors knowing about it. It's a negotiation in which the investors knowingly decide that it's worth paying millions to founders in order to get a piece of the company.
That might be wrong! It might be a bad investment. But it is in no way fraud, and there is no reason at all to feel bad for those investors - we're not even talking about retail investors, we're talking about investors who pay lawyers and accountants 10s of thousands to do due diligence on companies, and who negotiate for a living.
That is nothing at all like a ponzi scheme (again, unless someone is lying somewhere along the way / committing fraud).
I certainly wouldn't say they are fraud.
I think my examples are instances where people are good at selling an idea and not having full intention of executing well after receiving financing.
I'm certain that some percentage of entrepreneurs actively think "If I can just sell my idea to investors, I can get rich regardless of whether the idea works or not." That's my ponzi scheme analog.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
Can you please clarify what is wrong with that exactly?
I've been a part of this site for like 10 years, and I think that any site that invites public comments is bound to have controversial topics come up. Further, I do my damn best to be respectful on this website, so your blanket characterization of my comments is unfair.
I appreciate that you put effort into being respectful on this website! That of course counts for a lot, in fact it's the most important thing. It's just that generic/unsubstantive comments are a separate issue.
I would love to have a bullet proof fully reasoned human readable argument, but many times it's hard to translate abstract thoughts into text.
Will try to do better, I really enjoy this site and the content/discussion in comments.
Clearly, that wasn't clear. Text is hard to convey tone and context. :)
People would not be willing to pay the price however.
An efficient economy doesn't mean you can do anything you can imagine is technically possible; it means that market rates with everything priced in properly will discover whether or not enough people value it enough to pay for it.
Local economies were functioning well before for years, you were getting food from around your area, which is perfectly acceptable and efficient.
Doordash works today because venture capitalists are throwing millions of dollars at it, and dramatically subsidizing the cost of the delivery.
In other words, you can do that today because someone else is willing to pay. The VC's money won't last forever though. The question is if the economies of scale it creates will be enough to reduce the cost of delivery such that it is a sustainable business.
Most available data says "Probably not."
You weren't willing to pay the unsubsidised price.
- delivery was under-served and over-priced, and taxis charged too much, often because of viciously expensive auctions for limited legal taxicab slots, with the city raking it in and the drivers having to recoup it from fares
- Uber and friends are exploitative dumping schemes that tighten the screws on their gig workers even while they firehose money at customers
I couldn’t get a taxi in Chicago with a full beard. Period.
I've always wondered what the extreme end of this could look like. It seems like here in London companies in this same area are popping up almost weekly in areas like grocery delivery, food delivery, ride-sharing, etc, and they almost all have absolutely crazy initial sign up discounts. I suspect there is an entire class of people that are effectively taking advantage of this and I wonder how much they manage to save.
>Real business flywheels do exist. Software makers have managed to lock users in and thus generate gross margins typically above 70%.
No, it's not just "lock in" it's the magic of minimal to zero marginal cost, near zero "stocking" cost, instantaneous reaction to demand, etc. Software and digital services firms face dramatically different scaling curves than traditional physical products/services. That they also in turn have been able to continuously add in ways not limited by IRL physical constraints and experience real network effects certainly helps, but I suspect one of the big foundational issues for a lot of these valuations is people naively applying software business lessons to businesses based around hardware and real world physical human interactions. It doesn't cleanly translate though, they aren't the same thing.
But these gig-economies clearly aren't software or content. And they have very real minimum price. And not even robotaxis will fix that. Just because you make software doesn't mean you are such tech company, see WeWork...
[0] Yes I know WINE exists. It doesn't really affect the argument here; the fact that it's legal to reimplement APIs merely puts upper bounds on the size of the software monopoly. And those bounds are really high - reimplementation is far more difficult than just, say, pirating Windows.
For now unreality keeps the market high.
Does this mean that Tesla would have a smaller profit margin without subsidies, or that Tesla would not be profitable in real terms without the subsidies?
Compare Tesla's revenues against other trillion dollar companies and it clearly seems overvalued. Here's Bloomberg's analysis - https://www.bloomberg.com/news/articles/2021-10-26/tesla-is-...
Ah yes, the internet-of-cars market. It would be very wise and lucrative to dominate there.
Platform economy can create huge profits if you can lock in the markets. Create moat that keeps competition away.
Uber, DoorDash have none of that.
Uber's global brand recognition can help with tourists and business travelers who just want familiar, but they are small fraction of the market Uber needs to lock in to justify their market cap. Uber is not like Amazon with returns to scale.
E.g. nothing is stopping Google from offering a competing service, right from within Google Maps, or Android.
https://finance.yahoo.com/quote/DASH/insider-transactions?p=...
https://finance.yahoo.com/quote/UBER/insider-transactions?p=...
Did my MBA thesis on this subject with the benefit of 20 years of engineering experience. The numbers simply do not work unless you change how cities and residences are built, which would cost far more than you'd ever gain from solving Last Mile costs - the breakeven time is of the order of 100-200 years!
The VERY WORST are US-style suburbs. The best would be Asian-style urban - which NO US CITY is other than some parts of Manhattan.
I suspect these will need truly significant infrastructure changes to actually function as last mile.
> The Kiwibots do not figure out their own routes. Instead, people in Colombia, the home country of Chavez and his two co-founders, plot “waypoints” for the bots to follow, sending them instructions every five to 10 seconds on where to go.
> On the ground in Berkeley, people also do a lot of robot support. Traveling at 1 to 1½ mph, the bots would take too long to chug to local restaurants, so Kiwi workers pick up the food at restaurants and take it via bikes or scooters to meeting spots around campus to insert into an insulated bag in the bots’ storage compartment.
> The average distance a robot covers for a delivery is about 200 meters (656 feet, or one-eighth of a mile) which makes them fall short of a “last-mile” solution.
From https://www.sfchronicle.com/business/article/Kiwibots-win-fa...
Capitalism does not optimize for sustainable global maxima, only local ones - and in this case, the incentives aligned for this to be a local maxima.
They know that the path finding algorithm isn't the important part right now. The most important thing is proving that the robots can provide the service.
These types of path finding algorithms already exist, so it's just a matter of automating and improving margins.
Do you include India in Asia?
“If something can’t go on forever, it won’t.”
My experience is anecdotal but I visit my home country every year for a few months and I can clearly notice the declining quality of Uber's services:
1. Vehicles, on average, take at least 10-15 mins longer to get
2. Even if you find a vehicle, 60% of these rides are canceled (either by the driver because they call me and find out they don't want to go that way or they just don't move at all and I'm forced to cancel)
3. After all this, if I am lucky to get into a commute, every driver has complaints about Uber (complaints include intransparent pricing, delays in payments). Most of these drivers are completely dependent on Uber or similar services and have heavy debts that they are now unable to service.
4. Uber's app itself appears to get bloated by the day and while they do appear to make an effort collect my feedback when rides get canceled, not once have I got an impression that the feedback matters at all. Additionally, payment options are numerous but they require me to complete multiple steps to finish which puts me off using it (not Uber's fault I suppose but is part of the riding experience).
Given that they are competing against flag-down autos and rides, not to mention public transport and private vehicles (as electric bikes and cars get more popular), I think their model is not sustainable anymore and I expect them to struggle further as riders withdraw and once the demand-supply gap grows further, it's a downward spiral.
It's actually getting really noticeable. It used to be easy for me to hail a taxi or get an Uber from a pub, it's next to impossible now
Rides in central neighborhoods such as Chamberí used to take 2-3min at most, now it's very common to see waits of 7-8min.
VC start-up burning money to make things or subsidise customers in attempt to acquire them is neither.
I'm really starting to hate when these terms that have rather specific and well understood meanings are thrown at anything. If you want to call it something just say it is big scam. Scam really could be anything. Not specific thing.
[0] https://techcrunch.com/wp-content/uploads/2021/11/Screen-Sho...
As for "creative accounting", pretty much everyone in this industry segment uses EBITDA. That's the language investors and media use to talk about earnings calls for not just Uber, but also Lyft, Doordash, etc. If you want to make a case for why GAP analysis would make more sense vs EBITDA given the maturity of the industry, I suppose a more elaborated argument is in order?
[0] https://www.investopedia.com/terms/m/mark-to-market-losses.a...
What I'm pointing out is that a) the argument about "duping investors" doesn't really make any sense anymore now that Uber is a public company (since raising VC rounds by giving them paper equity is no longer really a thing), b) the balance sheet numbers have been trending towards positive cash flow (and fairly aggressively, at that), even despite a pandemic that could accurately be described as the worst thing that could possibly happen in this industry segment and c) the core vertical (rides) is actually cash flow positive and funding other parts of the business.
For example, in the table linked above, they've accounted for all revenues, but not attributed all of their expenses by segment. According to their filing their total loss from operations across all segments was $572M, however if you add up all their segments in the table, they come out to a $8M profit. That's what bothers me. If a company has 3 segments that generate 100% of its revenue, how can it claim that $600M in operating expenses shouldn't be attributed to any of those segments, thus making one of those segments profitable.
I think everybody in the industry segment uses the same sketchy metrics because they are also terribly unprofitable.
I think the narrative people are pushing about bleeding money on every ride is too simplistic though. I could definitely get behind an argument that, for example, driver incentives ought to be bucketed under mobility, but on the other hand, attributing a Didi valuation fluctuation to a business vertical is obviously silly. Personally, I'm not convinced that there are enough "hidden" losses in misc categories that are "rightfully" attributable to mobility to offset the Q3 performance, and my understanding is that many analysts are bullish on Uber right now because they see the trend in these metrics, adjusted as the metrics may be. I guess we'll see what happens next year.
Uber drivers have always done ok in the short term, new or old, it's Uber that loses money on every ride. And if the drivers are not coming out ahead long term due to maintenance costs, that's not affecting newer drivers any more than older drivers.
What makes it a ponzi scheme is that the initial investors and the people that run it knew they couldn't possibly make money and yet they were able to get tons of investors to pour capital into a business that couldn't make money. New investors aka public markets paid out the old investors aka venture capitalists.
We've simply built systems we cannot maintain as well anymore, under new resource constraints.
I have come to depend on Lyft and Uber and they are failing me and have been for a long time now. So long that I now plan to get a driver's license and a car. I don't know how else to make it in this world. If you're at a business and it's closing soon, and raining outside, you are likely to be outside in the cold and rain for 30 minutes waiting for a car.
It's ridiculous. I'm giving up and have already booked my written drivers test for WA.
There are places in the world with substantially better transit than Tacoma. It’s always been a pretty difficult place to live without a car, except maybe for a brief period between 2013 and 2021 when Uber was heavily subsidized by VC.
Is that like how in theory, theory is always right over practice, but in practice, practice is always right over theory?
The more apt comparison is calling a cab to take you to the airport. I've never had to wait more than a few minutes at any hour of day or night, and the pricing is equivalent to Uber.
I would take public transit where I live but I’m about 1-2 miles from the nearest bus stop that could get me to the airport (too far to walk with checked luggage). No big lots or houses where I live - people crammed in. The bus is unpredictable and runs infrequently and takes a very long route to get to the airport. (1+hr) If I take the train, I have to go even further walking and then I have to pay something like $9 then make a transfer (more time spent) and pay another $6. The time spent is maybe less than the bus but because of transfer - it can be quite slow.
Add in that I’m usually traveling with a partner and I love to get to the airport just as boarding starts and this is a colossal waste of time + money. I pay the $30-35 for a Lyft/Uber and it’s way faster and more reliable. Sometimes cheaper too. It’s like 1/3rd the time spent (20-25min) vs 1.5hr+. Oh and I’m not adding in the unpleasantness of either transit option - just cost and time…
I live in the peninsula of SFBA and go to SFO at least twice a year. Seattle has much better options for SeaTac if you’re in the actual city.
I've realized that I can just drive to the airport, pay for long term parking ($13/day) and still come out even with Uber fares for trips as long as 3 weeks. This is something I used to do a decade ago. It's hilarious that we have gone a full circle on this.
Thanks I guess lol
I might be wrong though.
All of these companies are EBDITA profitable with decent margins and the net loss is them reinvesting in marketing, product and M&A (from their earnings reports). As the effects of covid wanes, their profits are going to go up very quickly which will be seen over the next year.
What REALLY gets my goat is how much mental real estate these wannabe entrepreneurs get.
Personally, I joined the tech industry because I was more inspired by the smaller, incremental innovations that generated value. Something like CRT TVs becoming razor thin, or mobile phone cameras overtaking traditional cameras in resolution, or the Apple M1 chip/ARM, THAT was what I used to think of when I thought "Innovation".
However, smart people around me these days, they have no interest in actually doing hard, innovative things. The definition of "smart" today, is actually to raise a bunch of VC money and get a "net worth". And that makes sense, doesn't it? Why work hard, when you can "generate" "billions" of value with just a Powerpoint slide deck?
The end result of all this is that people actually get discouraged from doing the hard work and actually generating real value! Yeah, why should I spend time understanding Supply Chain basics, or studying Operations Research theory? Why should I actually come up with an improved heuristic for Travelling Salesman? Let me just make a shiny Powerpoint, and head on into my first VC meeting.