Tag Archives: Uber

The Man Who Called Bullshit on Uber, by Noah Lanard

Posted on November 6, 2021 | Leave a comment

You can’t take a low margin business like taxis and turn it into a gold mine with a high tech app. From Noah Lanard at motherjones.com:

Hubert Horan has been on a lonely quest to show why the company’s business model is fundamentally flawed.

Mother Jones illustration; Getty

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In December 2016, Forbes put Uber co-founder Travis Kalanick on its cover. “Super Uber,” a headline declared. “The most valuable startup ever isn’t content to be the Uber of Uber. How the $68 billion juggernaut is about to change the way everything moves.”

The story opened with Kalanick pacing about a conference room. He was not just some “bro” or “douche.” As “jam sessions” like this one revealed, he had a “special sauce.” This was Uber’s actual genius: A PR machine that could transform six men listening to a boss in gray chinos into something almost mystical.

Two weeks before, Hubert Horan, a little-known expert on the airline industry, wrote a blog post for an equally little-known website, called Naked Capitalism, that went in a different direction. Horan’s thesis was that Uber was a tremendously unprofitable, inefficient, and not particularly innovative company that would make money only if it bought its way to an unregulated monopoly.

Kalanick on the cover of Forbes in 2016.

Forbes

Compared to the Forbes piece and many others like it, Horan’s article was a fiduciary root canal. (“There is no simple relationship between EBITAR contribution and GAAP profitability,” reads part of one sentence.) The goal was to show that Uber was hugely unprofitable and how, in the event that it did succeed, profit would come from hurting consumers and overall economic welfare by cornering the taxi market.

Horan, who started consulting in the airline industry after getting his MBA at Yale in 1980, has now written 26 more installments of his Uber series. When combined as PDFs, the posts run 193 pages. They reveal him to be much more a Cassandra than a crank. Uber has lost in the neighborhood of $28 billion since it launched in 2009. Its rides now cost far more than cabs in many major cities, its workers are as exploited as ever, and taxi drivers face massive debts, partly as a result of its business practices. Consumers, meanwhile, are shocked to learn what the rides investors have been subsidizing actually cost.

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The Profitless Prosperity Sector Will Collapse… by Adventures in Capitalism

Posted on January 6, 2019 | Leave a comment

There are a lot of hope-and-dream companies sucking up tons of money but generating no profits, with no prospect of doing so in the foreseeable future. The profitless prosperity sector is headed for trouble. From Adventures in Capitalism at adventuresincapitalism.com:

Near the culmination of all great stock market bubbles, at least one of that cycle’s supposed luminaries suffers an epic collapse because of fraud. As a result, fresh capital is restricted from that sector when it is needed most, leading to further crisis and a winnowing out of the sector as competitors cannot raise additional capital. Remember; suckers are always willing to finance bad businesses, but fraud means you immediately sell. It is this fear of endemic fraud tarnishing a whole sector, not economics, that finally ends a bubble.

Following Enron; capital was restricted from pipelines and energy trading. The collapses of WorldCom and Qwest led to a slow-down in fiber-optic buildouts. After the collapses of Ivar Kreuger and Samuel Insull, there was a multi-decade decline in conglomerates and holding companies. Following the collapse of Lehman Brothers, there was a multi-year dearth in underwriting archaic structured products and I’m sure the collapse of Madoff led to a decline in Ponzi investing. There are always second order effects in the sectors where these companies were previously shining lights—along with a lot of carnage. As a rule; if the biggest players were cheating a lot, even the honest guys were cheating a little. With Tesla (TSLAQ – USA) beginning its death rattle it’s worth considering what will happen to the rest of the Profitless Prosperity Sector.

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What Future Is Uber Seeing for Itself? by John McNellis

Posted on July 15, 2018 | Leave a comment

Uber can pay its drivers more and increase its costs, or it can try to automate its drivers out of their jobs, but the technology isn’t ready for prime time. From John McNellis at wolfstreet.com:

Its fleet of autonomous cars thus far has gone the way of the Spanish Armada, producing nothing but grief.

While Uber isn’t exactly driving straight to the bank, it may get there yet. The company has ripped through $10 billion to date, but its latest report (Q1 2018) is sufficiently rosy for investors to buy into a $62 billion valuation. How rosy? Uber is losing lots of money, but only half as much as it did in the first quarter of 2017, a ground-rule double for Silicon Valley.

Digging a little deeper, however, these financials reveal a disquieting fact: While the company’s 2017 earnings were up 70% over 2016, its bookings (total income from rides driven) increased by only 55%, a disparity which suggests that Uber sliced away yet a larger share of the pie for itself, cutting into its drivers’ already meager earnings.

To this point, the Center for Energy and Environmental Policy Research at MIT determined in a March 2018 study that Uber has achieved its success the old-fashioned way, that is, on the backs of its workers. The MIT paper concluded that 74% of Uber (and Lyft) drivers earn less than the minimum wage of the state in which they drive. Uber, however, immediately challenged the MIT findings and, somewhat surprisingly, MIT conceded that its methodology might be flawed (a few key survey questions were unclear) and that different approaches to the same data suggested that Uber drivers earn somewhere in the $8-10 an hour range.

MIT asked Uber to release its own internal data to decide the issue, but the company has apparently refused. While this debate should remind us that ivory tower business studies ought to be viewed with the skepticism accorded papal bulls, this paper is buttressed by the fact that, depending on which unreliable internet source you believe, somewhere between 50% and 96% of all Uber drivers quit every year.

But put aside its drivers’ plight for a moment, take a deep breath, and simply acknowledge that Uber is the best thing to happen to transportation since Henry Ford, with the company’s service being to a taxi what a bicycle is to walking. Uber is a runaway success for its users and, in their myopic view, practically perfect just the way it is.

To continue reading: What Future Is Uber Seeing for Itself?

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The Big Tech Backlash of 2018, by Raúl Ilargi Meijer

Posted on April 5, 2018 | Leave a comment

There’s a revolt brewing against the tech titans that have been stock market darlings the last few years. From Raúl Ilargi Meijer at theautomaticearth.com:

Something must be terribly wrong with the world. A few days ago Elizabeth Warren agreed with Trump on China, now Bernie Sanders agrees with him about Amazon. What’s happening?

Bernie Sanders Agrees With Trump: Amazon Has Too Much Power

Independent Vermont senator and 2016 presidential hopeful Bernie Sanders echoed President Donald Trump in expressing concern about retail giant Amazon. Sanders said that he felt Amazon had gotten too big on CNN’s “State of the Union” Sunday, and added that Amazon’s place in society should be examined.

“And I think this is, look, this is an issue that has got to be looked at. What we are seeing all over this country is the decline in retail. We’re seeing this incredibly large company getting involved in almost every area of commerce. And I think it is important to take a look at the power and influence that Amazon has,” said Sanders.

A backlash against Facebook, a backlash against Amazon. Are these things connected? Actually, yes, they are connected. But not in a way that either Trump or Sanders has clued in to. Someone who has, a for now lone voice, is David Stockman. Here’s what he wrote last week.

The Donald’s Blind Squirrel Nails An Acorn

It is said that even a blind squirrel occasionally finds an acorn, and so it goes with the Donald. Banging on his Twitter keyboard in the morning darkness, he drilled Jeff Bezos a new one – or at least that’s what most people would call having their net worth lightened by about $2 billion:

“I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” You can’t get more accurate than that. Amazon is a monstrous predator enabled by the state, but Amazon’s outrageous postal subsidy – a $1.46 gift card from the USPS stabled on each box – isn’t the half of it.

To continue reading: The Big Tech Backlash of 2018

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Facebook, Uber and the end of the Great American Tech Delusion, by SPENGLER

Posted on March 23, 2018 | Leave a comment

America has been propelled by science and technology, but the hype, especially the financial hype, always outruns the reality. From SPENGLER at atimes.com:

We’ve been there before, in the crash of the dot-com bubble of 2000, when we believed that downloading pop music and porn would drive the economy of the future. We’ve done it again: We made another tech bubble on the premise that Americans would write the apps and Asians would make the hardware, and the miracle of connectivity would bring the world together in Mark Zuckerberg’s utopian vision. Internet community and Artificial Intelligence were the two blasts of hot air that inflated the bubble. Social media as a substitute for actual human interaction and computation as a substitute for human thought were going to waft us into the future.

Yesterday’s double crash of these delusions was the sort of irony that makes one intimate the hand of God in human history.

The crown jewel of Artificial Intelligence shattered when Uber’s autonomous SUV ran over Ms. Elaine Herzberg at the corner of Curry and Mill Street in Tempe, Arizona. And the concept of Internet community vaporized when news reports alleged that Cambridge Analytica improperly retained Facebook profiles of 50 million users. Facebook promptly lost 7% of its stock market value in yesterday’s trading, and other big tech names fell by 3% to 4%.

All the hype in the world can’t stand up to the ugly fact of a dead human body on the road. A few skeptics, including the distinguished physicist and venture capitalist Dr. Henry Kressel, have warned that AI in general and self-driving cars, in particular, are mainly hype. As Kressel wrote last year in Asia Times:

In a well-controlled environment (like driving on a track), the computer can be expected to respond to situations consistent with programmed information. The problematic situations are the accidental ones when something happens on the track that requires a quick response different from the programmed actions. This is where the awareness and quick response of a human driver come into play and where the response of a computer making the decisions is quite another matter. And this is the skill that differentiates race-car drivers from the rest of us – and computers from all of us.

To continue reading: Facebook, Uber and the end of the Great American Tech Delusion

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The ‘Sharing Economy’ Is A SCAM, by Karl Denninger

Posted on June 23, 2017 | 2 comments

You can tell by the shining eyes and expressions of benevolent goodness that characterize proponents of the so-called “sharing economy” that its nowhere near what it’s cracked up to be. From Karl Denning at theburningplatform.com:

This is a nasty indictment of so-called “sharing economy” entities.

We found that 85% of side-gig workers make less than $500 a month. And of all the side-gig platforms we examined, Airbnb hosts earn the most by far.

In other words there’s not a prayer in hell you can make a living doing any of this; excluding AirBNB the average person was making under $400 and the median person is making under $200!

What’s worse is that none of this appears to account for costs.

If you make $200 driving for Uber but spend $100 of that on fuel then how much an hour are you actually making?

Oh, and you must account for the deterioration of your vehicle (each mile has a cost in maintenance, deterioration of and consumption of the engine, transmission, suspension parts, tires, etc) as well.

And let’s cut the crap on the name of this thing too.  You share something you would already be doing.  If I’m driving to work and your home and office locations are betweenwhere I would otherwise travel then we could be sharing a ride to work.  If you page me on some sort of app and I make a trip I would otherwise not make I’m not sharing anything — I’m selling you the service of carting your ugly ass from one place to another.  Likewise, the premise of “Task Rabbit” or “Doordash” has nothing to do with sharing; I would never bring you food or deliver your package without being paid to do it because there’s no part of my daily life that involves performing some random task for you.

Note that since this data set comes from people applying for loans the error, if any, is likely to be in overstating their income and expenses are not asked for.

To continue reading: The ‘Sharing Economy’ Is A SCAM

 

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Viva Uber! by Eric Peters

Posted on March 11, 2017 | Leave a comment

Eric Peters salutes Uber for upsetting a lot of government and crony capitalist apple carts. Now if it would just make money. From Peters on a guest post at theburningplatform.com:

About four months from now, Americans will go through the sickly, depressing ritual of celebrating the liberties they no longer enjoy. This includes, among an almost infinite number of things now malum prohibitum (that is, illegal, a violation of some law or statute, but entailing no harm done) being free to hire someone to give them a ride at a price mutually agreeable and otherwise acceptable to both parties.

The government – that is, the busybodies-with-guns who are the government – consider this sort of peaceful, voluntary transaction between consenting adults, neither of them complaining, to be intolerable because it is not done according to the rules laid down by these busybodies-with-guns.

Hence, expensive, inefficient – but very legal – taxi service.

Along came Uber.

Precisely because government-approved taxi service sucks.

Instead of a government-approved car, and all the government-approved rest of it, the idea was that people without any special training, outfits or permission slips but who had a vehicle and were willing to drive people from A to B could do so and earn a buck thereby. Uber would serve as the middleman – providing the conduit (an app) via which the drivers and the riders could connect with one another.

This would be done more efficiently – less expensively – than Officially Approved Taxi service.

The horror.

Uber has been accused of just about everything shy of employing John Wayne Gacy proteges in clown suits, handcuffs and roofies in the glovebox.

To continue reading: Viva Uber!

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Does Uber Know it Can’t Make Money Unless it Uses Self-Driving Cars and Gets Rid of Human Drivers? by Wolf Richter

Posted on February 26, 2017 | 1 comment

SLL has always had a tough time figuring out business models where losing money is an integral and continuing  part of the strategy. It must take an MBA from an elite business school to understand it. From Wolf Richter at wolfstreet.com:

Something is out of whack on the expense side.

Waymo, the self-driving car unit of Google’s parent company, filed a lawsuit on Thursday in federal court against Uber and its recently acquired startup Otto, accusing Uber and Otto’s founder Anthony Levandowski, who’d been a project leader at Google’s self-driving-cars project since 2009, of stealing a huge pile of trade secrets.

The New York Times:

In a federal court filing in San Francisco, Waymo said Anthony Levandowski, who runs Uber’s autonomous car division, downloaded 14,000 files from Google a month before leaving to start his own self-driving car company, Otto. Uber acquired Otto in August for $680 million, about seven months after Mr. Levandowski left Google.

“Otto and Uber have taken Waymo’s intellectual property so that they could avoid incurring the risk, time, and expense of independently developing their own technology,” the company said in the filing. “Ultimately, this calculated theft reportedly netted Otto employees over half a billion dollars and allowed Uber to revive a stalled program, all at Waymo’s expense.”

This lawsuit sheds new light on a problem Uber has, a problem that transcends all other problems, of which Uber has plenty: In 2015, Uber lost $2.2 billion; in 2016, the losses are said to have jumped to $3 billion.

Net revenue – the amount left over after it pays its drivers – was expected to exceed $5.5 billion for 2016. In the third quarter alone, it lost $800 million on $1.7 billion in net revenue.

But it’s even worse; these figures are based on sources cited by Bloomberg in late December:

Those are rough figures that may underestimate how much money Uber is losing and don’t include interest, taxes or stock-based compensation.

But it doesn’t seem to matter to investors who’ve been eager to throw vast sums of money at it. Uber has received a total of $12.9 billion in funding, according to the Wall Street Journal. The last round of funding valued the company at $68 billion, which is 37% higher than Ford’s market capitalization of $49.6 billion, though Ford generated $152 billion in revenues, a net income (GAAP) of $4.6 billion in 2016, and an “adjusted” (non-GAAP) income of $10.4 billion.

To continue reading: Does Uber Know it Can’t Make Money Unless it Uses Self-Driving Cars and Gets Rid of Human Drivers?

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The Politicians’ War on Uber, by John Stossel

Posted on August 2, 2015 | Leave a comment

Governments produce nothing but impediments. From John Stossel at reason.com:

Hillary Clinton gave a speech warning that the new “sharing economy” of businesses such as the ride-hailing company Uber is “raising hard questions about workplace protections.”

Democrats hate what labor unions hate, and a taxi drivers’ union hates Uber, too. Its NYC website proclaims, “Uber has the money. But we are the PEOPLE!”

The taxi cartels, which provide inferior service and are micromanaged by government, don’t like getting competition from efficient companies like Uber.

Clinton didn’t mention Uber by name, but we don’t have to wonder which company she meant. The New York Times reports that Clinton contacted Uber and told them her speech would threaten to “crack down” on companies that don’t treat independent contractors as full employees. Apparently, Democrats think something’s wrong if people are independent contractors.

But no driver is forced to work for Uber. People volunteer. They like the flexibility. They like getting more use out of their cars. It’s win-win-win. Drivers earn money, customers save money while gaining convenience, and Uber makes money. Why does Clinton insist on interfering with that?

Clinton’s “social democrat” pal, New York’s Mayor Bill de Blasio, wants to crack down on Uber by limiting how many drivers they may hire. Uber cleverly responded with an app—a “de Blasio option”—that shows people how much longer they’d have to wait if de Blasio gets his way.

Good for Uber for fighting back. I wish more companies did.

Federal Express didn’t.

FedEx Ground classified drivers as independent contractors. Again, drivers were willing to drive, FedEx Ground was willing to pay, and customers got packages faster and more reliably than they did from the U.S. Postal Service.

But lawyers built a class action suit on behalf of FedEx drivers, saying they should be treated as employees, paying payroll tax, getting workman’s compensation, receiving benefits. FedEx settled the case for $228 million and began abandoning its independent contractor system.

Uber’s use of independent drivers—who use their own cars—is now called analogous to FedEx’s use of delivery drivers.

That means Uber may soon have to treat its drivers as employees. Business analysts at ZenPayroll estimate that the changes will cost $209 million. We customers will pay for that, and we’ll have fewer ride-share choices, too.

To continue reading: The Politicians’ War on Uber

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