Home / General / Uber Is A Quasi-Ponzi Scheme

Uber Is A Quasi-Ponzi Scheme

Comments
/
/
/
1070 Views
George, 35, protests with other commercial drivers with the app-based, ride-sharing company Uber against working conditions outside the company’s office in Santa Monica, California June 24, 2014. REUTERS/Lucy Nicholson (UNITED STATES – Tags: BUSINESS EMPLOYMENT TRANSPORT CIVIL UNREST) – RTR3VKJ9

One of the benefits of Uber for residents was that it used to be essentially impossible to get cab service in Queens and most parts of Brooklyn. Only that’s a little misleading. When I lived in Brooklyn and Queens, I could get on the horn and have a clean car drive me wherever I wanted to go within 15 minutes. I didn’t do it very often not because the service was unavailable and unreliable but because it was really expensive. The thing is that Uber hasn’t actually solved this problem — it’s just offering massive subsidies to riders and drivers:

But more than any technical advantage, the key to Uber’s growth has been its $15 billion of venture-capital funding. The company has long acknowledged that most of its losses come from subsidizing rides. (The most progressive argument for using Uber may be the fact that it has been a considerable redistribution of wealth from investors to working-class drivers.) But even close observers were surprised last November when a transportation-industry analyst named Hubert Horan published an examination on Naked Capitalism of the limited financial information Uber had made public and determined that it was covering around 60 percent of the cost of each Uber ride. Horan’s article expanded into a nine-part series that went as viral as 39,000 words with 89 footnotes on transit economics can. The 60 percent number was widely cited in various prominent outlets, and Uber has never contested Horan’s math.

More worrying to Horan than the losses themselves, which any growing company has to endure, was the fact that it didn’t seem Uber had brought significant efficiencies that would lower the cost of driving people from point A to point B, a difficult business with thin margins. Hailing a car with an app had been a magical experience when it was first released, but to Horan, it hadn’t changed the economics much more than the Domino’s app for ordering a large pepperoni. “You go through this checklist of stuff and the old bullshit meter goes into overdrive,” Horan told me. “They haven’t done anything to solve any underlying problems. It’s all people who have this quasi-religious belief that technology will solve every problem known since the dawn of time.”

There’s lot of excitement about Uber and Lyft coming upstate and I can understand it — I can’t speak for other similar cities but certainly in Albany taxi service is a disaster. I will pay a premium to drive to and park at the airport or train station because if you call for a cab you have no idea if a cab will actually come or what they’ll charge you or if there will be some kind of smelly gook on the seats that forces you to pay for overpriced hotel dry cleaning when you reach your destination (true story.) And if you’re getting a cab at the airport or train station, you’re generally forced into full-fare ridesharing with the destinations of the passengers and the routes being entirely random. I won’t weep when most of these companies are put out of business, and in the short term service will greatly improve. But once the subsidies are limited or vanish, it’s going to be a tough business, because most locals have cars, are used to not relying on taxis, are in the habit of limiting their alcohol consumption if they’re not walking or taking the bus, etc. Essentially, in large urban areas with high demand it’s not going to be possible for Uber to maintain a monopoly and in smaller cities (especially typically sprawling ones) it’s questionable whether even a monopoly can actually be profitable.

[via]

FacebookTwitterGoogle+Share
  • Facebook
  • Twitter
  • Google+
  • Linkedin
  • Pinterest
  • humanoid.panda

    “One of the benefits of Uber for residents was that it used to be essentially impossible to get cab service in Queens and most parts of Brooklyn. Only that’s a little misleading. When I lived in Brooklyn and Queens, I could get on the horn and have a clean car drive me wherever..”

    You are white :-)

    • Dilan Esper

      +1

      Was going to say the same thing.

      • Denverite

        Eh. I took Scott’s point to be that even in Albany he could call a limo or similar high-end car and it would be there within 15 minutes but be super pricey. I’m not sure this is a white/non-white issue.

        • Denverite

          meant Brooklyn/Queens

        • Hob

          Not even “high-end car,” just a car service. NYC has lots and lots of little car-for-hire companies, you call them to be picked up, they quote you a price– which, depending on traffic, could end up being similar to what the taxi fare would be for the same trip, or it could be higher but you’re basically paying a premium for the convenience of definitely getting the car and knowing what the price will be. And they don’t get to look at you to see if you’re white before they take the call; of course they could simply act like they don’t have any cars available for certain neighborhoods, and of course Uber could easily do that too.

          Uber did not invent this model, they just made an app for it and, as Scott said, did some shenanigans with the pricing model to make it look like they’d saved money through magic tech.

          • addicted44

            Also, they said they are not a taxi service, and evaded a bunch of regulations, such as checking if your drivers have a criminal background.

          • Brett

            That app is pretty neat, though. You no longer potentially need a centralized dispatching system anymore, just a distributed system to mobilize car service vehicles to where they need to be.

            • Redwood Rhiadra

              Uber IS a centralized dispatching system, hosted in their data centers. It’s not a distributed system – the clients don’t do any significant processing.

        • cpinva

          “I’m not sure this is a white/non-white issue.”

          i can almost assure you it would be, when the ride arrived. I’ve watched it happen in person. when i asked the guy what happened, he told me it was because he was black. i offered to get one for him, and pretend it was for me. he thanked me, but ended up calling his wife. i was just shocked that this could still happen in America. i guess i was very naive.

      • Ronan

        I’m a little lost. Was this being disputed ?

        • humanoid.panda

          I might have misread Scott, but I understood him to say he had no problem hailing a car in Brookly/Queens. And I pointed out that the experience of non-white hailers was very different.

          • Bloix

            No. He’s not talking about hailing a car from the street. Legally only a licensed taxi can pick you up in the street, which in NY means you need a medallion, and due to that artificial limit on supply NY taxis stay in Manhattan and at the airports and don’t cruise the streets in the outer boroughs for riders.
            In the outer boroughs you call a car service, which is not allowed to pick up riders on the street and dispatches cars to riders who call in. AFAIK there’s never been much of a racism problem with car services.
            What he’s saying is that Uber is an old-fashioned car service with an app, and where’s the economy of scale in that?

          • djw

            No, he’s saying taxi service isn’t/wasn’t available. He called a car service (which are more expensive than cabs, I think, and presumably less racially discriminatory, since you call first and the driver/service already accepted the fare and drove to your location, which would seem to raise the costs of engaging in casual racial discrimination, although I could be wrong.)

            • Scott Lemieux

              Right. My point was that even a white guy in a suit couldn’t hail a cab in the outer boroughs or count on a Manhattan cab to take him home.

              • Dilan Esper

                That situation was created due to entrenched racial discrimination from before Brooklyn gentrified.

                • wengler

                  That situation was created by the fact that the cabbie sees driving to Brooklyn as an automatic money loser. No return fare. At least half an hour of non-fare driving.

                • Dilan Esper

                  Not true. I grew up in a fairly distant suburb to LA (Burbank) and I could get a cab from any pay phone within 20 minutes, and could always get cabs home from Hollywood and Pasadena and other places. But there was a dead zone south of King Blvd., just about 3 miles south of downtown LA, where you could never get a cab.

                  This and the different way the police treated me versus black and hispanic friends (plus my own brother with tattoos) were my first introduction to White Privilege in America as a teenager.

                • Scott Lemieux

                  That situation was created due to entrenched racial discrimination from before Brooklyn gentrified.

                  Given that it was equally difficult to get to western Queens, this is at best an incomplete explanation. Nor could you easily hail a cab and get a ride to a neighborhood like Brooklyn Heights that has always been affluent and predominantly white.

          • Hob

            What Bloix says. Unfortunately it’s become harder to discuss this stuff without confusion arising, since things like Uber have been called “ride-hailing” services, even though they’re the opposite of street hails (the latter being the deal where you wave your hand and jump up and down and a driver happens to see you).

  • Ronan

    You could literally not get a cab anywhere in the world until uber. Even the people who were supposedly getting all the cabs were actually just hitching.

    • Brett

      Nothing but Fake Cabs.

  • BloodyGranuaile

    So basically it’s run like public transit is supposed to be, except instead of being owned and funded by the public it’s owned and funded by some unaccountable rich guys who don’t pay enough taxes.

    #nationalizeUber

    • Ahenobarbus

      Then they’d pass a law saying they’d have to turn a profit each year, and people would gripe about how expensive it is.

    • nemdam

      Ha! This is an even better way to describe it than a Ponzi scheme. A public utility that’s been pointlessly privatized as it can’t make money.

  • Denverite

    One of the benefits of Uber for residents was that it used to be essentially impossible to get cab service in Queens and most parts of Brooklyn.

    Try getting a cab on the south side of Chicago. Whenever I had an early morning flight I’d book three cabs in the hopes that maybe one of them would show up. I think that cab drivers generally were told “don’t take any calls south of Roosevelt.”

    • medrawt

      Our times in Hyde Park didn’t overlap, but I genuinely never had this problem. Now, you weren’t going to get a cab just looking for one out on the street, of course.

      • Denverite

        I wasn’t thinking Hyde Park — I was thinking like Bridgeport. Hyde Park was a little better (though still not great) because at least some cab drivers were aware of the university there, plus the hospital made it easier for them to get a return fare.

      • Van_Owen

        I don’t dispute your account, but I’d like to offer my own in contrast. I lived in Hyde Park from 2008 to 2012 and still have friends there. While I don’t recall any personal issues with getting cabs in Hyde Park (I didn’t leave the neighborhood much and generally took the bus to the airport), I know a number of people who had called cabs bail on them. An ex was once an hour late to a dinner with my mother and I because two separate cab companies that she called never showed up. I frequently had cabs express dismay at having to come to Hyde Park, and they’d usually play the “broken CC machine” game when we got there. Uber/Lyft really improved all that. I also know that some of my black friends were the first to adopt Uber in my social group because it was so hard for them to hail a cab on the rare occasion they saw one on the street down there.

        I do think one of the hardest parts of opposing malfeasance by Uber etc is that in a lot of cities the cab companies have built some serious ill will with many consumers.

        • Denverite

          I was not infrequently required to pay an up front cash deposit before a cab would take me from the north side to Hyde Park.

          • Scott Mc

            I don’t recall ever having that problem. I only lived in Hyde Park for a year, but every time we jumped in a cab to go back, we didn’t get any trouble. Now, I only remember a couple of times trying that solo, so maybe I just got lucky.

            • wjts

              Yeah, I very rarely took cabs in Chicago but never had a problem getting a cab from the North Side or downtown to Hyde Park. Going from Hyde Park, I called for a cab once or twice without any problems. Once, I even hailed a cab on 55th.

          • Hob

            Something that tends to get lost in taxi-vs.-Uber discussions is that their smartphone dispatching model isn’t just about convenience of placing orders: it also requires the user to create an account ahead of time with a credit card on file.

            I presume it’s obvious why guaranteed payment makes a huge difference in a driver’s decision to answer a call– and, having answered, to really follow through on that call and not ditch it if they get a better offer along the way. Taxi company groups that have created similar smartphone dispatch services, like Flywheel in SF, have taken the same approach to payment, and I think that’s why I started seeing much better follow-through on calls that I made through their app even when it was the exact same taxi fleet that used to mysteriously lose 20-30% of my orders along the way.

            The flip side of course is that this makes car service basically unavailable to anyone who doesn’t have a smartphone and a credit card.

  • Lost Left Coaster

    I don’t like Uber, but I have to admit that letting some venture capitalist somewhere pay for me to ride in a car is kind of appealing.

    • SatanicPanic

      yeah, I’m more inclined to take one now than I was an hour ago.

  • Rob in CT

    Err… I assume you meant to type smelly goop?

    • Denverite

      OR DOES HE

      • Rob in CT

        Now that’s a story we must hear!

    • wjts

      I’ve heard “gook” used that way before, but “goop” or “goo” would be better choices.

      • leftwingfox

        Yeah, no shit. O.o

      • Ahenobarbus

        Rhymes with book. Not to be confused with “guck.”

      • dl

        not the preferred nomenclature

    • cleek

      some kind of smelly gook on the seats

      PHRASING!

  • rea

    Isn’t this the old Standard Oil business model? Sell your product at a loss until all the competitors go out of business, then jack up your prices!

    • Domino

      But there’s no way they can price out their competitors. Any time the increase cost Lyft is right there to match them. There’s no way they can monopolize, and even if they did, someone else could easily get the funding to compete against them.

      As Atrios keeps pointing out – they have no viable path to a monopoly, and no clear business model for why economics of scale will significantly help their bottom line.

      • rea

        Uber’s competitors are not just Lyft, but regular cab companies.

      • blowback

        Someone watched The Producers. From $15 billion, the management could siphon off a couple of billion as benefits and then liquidate Uber once the rest of the money is gone. Could Uber succeed in the long run? No, and they don’t have to worry about a Springtime for Hitler hit.

      • Scott Lemieux

        And, in addition to the low cost of entry, demand is highly elastic. Uber would lose shitloads of customers if it charged market rates.

      • Brett

        It wouldn’t even have to be Lyft. All a competitor needs is a rival version of the app, and it could siphon off Uber’s drivers with higher compensation rates on the trip take. I could totally imagine fly-by-night startups selectively popping up to poach Uber’s most profitable markets.

        And that alone would be the death of the company, or at least its bankruptcy and massive restructuring. To pay back the vast amount of investment capital they’ve spent, they not only need profits but big profits.

    • malraux

      So if I own a bunch of oil refining equipment, its really hard for a competitor to break into that business. There’s lots of infrastructure that takes time and money to build up.

      What Uber has is a first mover advantage, and a willingness to subsidize the cost. But there’s not a huge fleet of Uber cabs out there, or a bunch of contracts with cities/airports, etc to prevent a new company from coming in once Uber raises its prices to actual cost. This is an area where consumers are extremely price sensitive, and theres low barriers to entry. Once VC gets tired of losing money, uber likely dies. Lyft might be in a better situation because it has avoided all the spending on self driving.

      • Richard Hershberger

        I think that inasmuch as Uber has a business model other than grifting its investors, self-driving cars are it. It wants to get a first-mover advantage as a driverless car service. I’m not sure how that business model is supposed to work, but in any case my daring prediction–of the future, no less!–is that we are not going to have driverless cars in any non-trivial sense in five years, much less within five years from the first time we were promised them within five years. The whole driverless car shtick seems to be “We have solved 95% of the problems. How hard can that last 5% be?”

        • malraux

          Yeah, I’d totally believe Uber could survive if they got self driving cars. But the leap from building an ok app to building a self driving car is rather far.

          • Richard Hershberger

            This. Google pulling it off is kind of plausible, though I am less impressed than some that it can handle the mean streets of Mountain View. But Uber? An ap company with a slimeball bro culture? I don’t see it.

            • econoclast

              Uber hired away Carnegie Mellon’s entire robotics department — over 40 people. They have also acquired other companies working on self-driving cars.

              • Ahuitzotl

                Given their lack of relevant management expertise, that’s probably detrimental to the cause of selfdriving cars.

          • dmsilev

            Actually, I think Uber would be in trouble even if a fully mature, operational, and mass-manufacturable self-driving car fell from the heavens tomorrow (on parachutes, so it was a soft landing). Consider the capital costs involved in acquiring tens or hundreds of thousands of these things, and then consider the ongoing maintenance and so forth. That’s all stuff that Uber doesn’t do right now, and they’d have to massively change their internal business structure to do it, since it will no longer be “car upkeep is the driver’s problem”.

            • erick

              Exactly, once self driving cars arrive it’s fairly simple for BMW, Tesla, Daimler etc to duplicate Uber’s app. It is hard to see how Uber duplicates their ability to make and maintain cars. As long as they need to buy cars while the car manufacturers don’t it is hard to see a buisness model where they can compete.

            • Chetsky

              Horan’s further articles in his series discuss the capital issues with Uber going to self-driving cars. Not pretty.

        • Joe Bob the III

          If domestic commercial airline flights crashed into the ground “only” 0.0001% of the time we would have about 200 people dying in air travel accidents every day.

          A recent article I read said that uber is running about 40 million rides per month. Of course, a wayward driverless car won’t have the same guarantee of a fatal result as an airplane hitting the ground. That said, 40MM rides @ 99.9999% success rate = every day about 130 people would have their driverless uber run into something.

          • Bufflars

            Yeah, but how many cabs nationwide have accidents every day? 130 doesn’t seem like a ridiculous number. The first fatalities from driverless cars will be big big news, but people forget that there are tens of thousands of driving deaths in the US each year. Falling asleep at the wheel is considered a nothingburger, but if your Tesla autopilot drives you into a semi it’s a huge blow to the company. Not sure how to fix that perception.

        • ASV

          It’s kind of the reverse Netflix. They established themselves with a heavy physical presence that was difficult to ramp up competition to, then used their strong position to move into and dominate a business that has very few barriers to entry other than the need for capital. Uber’s got the easy-to-enter business now, but if they can use their position to dominate a tough one, they can survive. And you can see how much they dominate the app-based dispatch sector by the fact that Lyft is so often overlooked in writing about Uber.

          • Scott Lemieux

            It’s a really weak analogy. For Netflix, every additional user is mostly profit. Uber is losing money on most of its rides, and there’s no reason to think that it can come close to monopolizing America’s relatively few large, dense urban centers or that even near-monopolies would be profitable in smaller markets.

  • sleepyirv

    It’s perhaps unsurprising that the natural inclination of Silicon Valley gurus is to do things no matter what the economic logic entails. In any other business, offering better/more convenient services suggests charging EXTRA for the additional benefits. But no, that’s not enough for the disruptors. Not only must they break local laws and regulatory schemes they find inconvenient, not only will TECHNOLOGY completely radicalized a moribund industry. No it will all be somehow CHEAPER and come with a FREE UNICORN.

    I guess when you sell your product as a scam, no one can get too upset at you when it turns out to be a scam.

  • mongolia

    i may just be really dumb (likely the case), but isn’t this classic capital investment at work – you subsidize losses to build up an initial capital infrastructure, in this case drivers and passengers, giving steady and reasonable employment for drivers and a reliable convenient service for drivers. as infrastructure takes a while to change, i would figure the investors and management in these companies are attempting to subsidize this for a few years while more people use this service reliably in a way that there are enough rides at a given time for the companies to not have to subsidize drivers/passengers, which could happen because people decide not to not purchase cars and only uber places, etc. i believe the econ 101 term for this is network effects, but don’t quote me on that

    now, this doesn’t excuse problems with union-busting/wage & benefit-gutting behavior, predatory behavior by these companies, etc., but i don’t think this is, from a 30,000 ft. level, a crazy idea. the devil, as they say, is in the details.

    • Murc

      i would figure the investors and management in these companies are attempting to subsidize this for a few years while more people use this service reliably in a way that there are enough rides at a given time for the companies to not have to subsidize drivers/passengers,

      Here’s the thing, tho.

      Volume doesn’t help you if individual sales aren’t profitable.

      There’s significant evidence that even if everyone in the US used Uber, it still wouldn’t be profitable without severely jacking up fares from where they are now.

      Taking losses in order to grow your business is common sense and indeed is smart business, but the thing is you need a plausible claim to eventual profitability.

      If you take a loss because you built a lot of physical plant to build widgets and ran an enormous ad campaign to convince people to buy widgets and had a lot of sales where you sold the widgets at a loss because you’re confident that once people use your widget they’ll never want to use another widget, that’s okay.

      If you take a loss because total costs to make a widget is one dollar and you’re selling them for fifty cents, and increasing the price to one dollar one cent would result in all your customers leaving, that is NOT okay.

      • mongolia

        > There’s significant evidence that even if everyone in the US used Uber, it still wouldn’t be profitable without severely jacking up fares from where they are now.

        have not seen these analyses (because i haven’t searched for them) but if that’s the case than my hypothesis doesn’t hold water. by chance, do you have those analyses, and is the rate of subsidation more like 10-20% of the fare, or more like 50%? be curious to see these, and if it’s 10-20% of the fare then they may think there’s a way to get from where they are now to where they’re sustainable by gradually increasing prices by 10% or so each year while people get more dependent on the service?

      • The Pale Scot

        Lucy: “How much profit are we going to make? Three cents a jar.
        Three cents a jar? That three cents goes to Caroline.
        Yeah.
        Well, uh maybe there is no profit on each individual jar, but we’ll make it up in volume.”

        Rickie: “This I’d like to see”

        Aunt Martha’s Old-Fashioned Salad Dressing
        https://www.youtube.com/watch?v=8ybBEo6ZnF4

        • FlipYrWhig

          As the good folks at First Citiwide Change Bank used to say, “All the time, our customers ask us, ‘How do you make money doing this?’ The answer is simple: Volume. That’s what we do.” (SNL, 1988)

    • malraux

      There’s no real scaling involved. The cost of a car’s depreciation plus gas plus insurance doesn’t get substantially cheaper at volume. And remember, Uber isn’t buying up fleets of cars, training drivers, etc. If a person stops driving for Uber, the car stays with the driver. They aren’t buying cars in bulk, so can’t really get discounts from manufactures. There’s no central repair hub, so maintenance costs are still expensive, etc.

      • jmauro

        This is wrong. They actually do get cheaper at volume, but you’d have to own the cars, buy your own gas, have employees, maintenance shop, etc.

        Trying with the outsourcing model won’t scale because you cannot really negotiate anything in bulk or even have enough volume to run your own service shop so you’re not paying a premium to repair a car. As long as they’re still totally committed to the contractor model they’re sort of stuck.

        • Scott Mc

          But they do offer drivers a financing program through which to buy cars; presumably they can also negotiate on behalf of the drivers.

          Also, there is scaling in volume if the utilization rate goes up. It still may not pencil out, but a greater utilization rate can definitely provide better margins than the average cab company.

        • malraux

          Right, that’s why there’s no cheaper at volume discount. The only bulk purchased item is the app.

    • Alex.S

      Uber’s current model does not have any investment infrastructure in it. They don’t own the cars and their drivers are mostly contractors, not employees. The only thing they have is their app. Granted, having an early app helps a lot because it’s had a lot of modifications and improvement done to it over the years. But it’s also replicable and not unique enough to represent “investment”. It’s very easy for a driver or customer to switch to a new service, with the only noticeable change being how much they make or are being charged.

      Their long-term plan is “lose money to keep out competitors” followed by “self-driving cars!”. But getting to that point could take a long time, and as soon as the investment money dries up there will be a ton of competitors.

  • Murc

    All Uber is is basically an app, and we’re currently living in an age in which hitting a button on your phone and it makes things happen in the real world, like a pizza being delivered or your bills being paid or a car showing up, seems magical.

    You know what else was magical once? Being able to pick up a device in your very own home and call someone who would deliver a pizza or come in a taxi for you or pay your bills!

    That stopped being magical and was just normal after awhile. This will as well.

    All Uber is, all it is, is the leveraging of the fact that we all walk around with small computers in our pockets and can use those computers as communications devices without needing to actually speak to another human being. (Making calls to other humans is really, really hard and stressful for lots of people, more than you know. Hitting some buttons and then things just happen is not.) That’s it.

    Now, that’s not nothing. Speed and convenience can be great things. But this is the telling bit:

    it didn’t seem Uber had brought significant efficiencies that would lower the cost of driving people from point A to point B, a difficult business with thin margins.

    If Uber can’t do this then it basically has nothing. They know it, too. This is why they’re going so big into self-driving car research while they have money to burn; if they can eliminate their labor costs they can keep their heads above water.

    • mongolia

      made a point about about how this seems to be uber trying to use network effects to keep itself relevant in the future, but i think this is more correct, since those network effects can be fairly ephemeral since you could just create an app that scans for all the major ride-share apps in the area, and if uber is slightly more expensive, they’re fairly screwed. if they have capital infrastructure, and most importantly very strong ip around that, then they likely become the biggest monopolist in the world.

      which makes resisting the republicans and electing as many good dems now even more vital – our only chance to not literally be in a supercharged gilded age may be through that.

      • Hob

        Google Maps has already started to do just what you said (presenting a side-by-side comparison of quotes from local Uber-like services*).

        (* Pet peeve: “ride-share” is a lousy term– I get why Uber wants to promote it, because it plays into their fiction that their drivers are just regular folks who are graciously letting you ride in their car now and then because Uber has made it so convenient, but come on, it’s a thing where people get paid to do stuff for you. End of pet peeve)

        • SIS1

          As someone who shares the same problem with the whole “sharing economy” bull crap (If money is exchanged directly, it ain’t sharing!) My personal nomenclature for this is ride-renting.

    • guthrie

      Self driving car research is also a way for them to persuade people to stay on board with them a bit longer to give them enough time to cash out.

    • zoomar

      Great point. Keeping the value of these apps and phones in perspective. Coincidentally reinforcing your point, NPR had a good segment this morning with some Brookings economists discussing their research showing that since about 2003, productivity in the country has been flat. There were exponential gains for over 100yrs from the industrial age of course. Then the digital age from the 60s until the early aughts when computers and processing power became ubiquitous. Incremental gains since then in processing power and display graphics plus, especially, the paradigm shift of smart phones and apps as you described above, while amazing and radical, have not brought the expected gains in productivity to the economy. As you said, all these clever sexy apps appear bring no more value to the table than a landline brings.

      • Murc

        As you said, all these clever sexy apps appear bring no more value to the table than a landline brings.

        Well, I’m not sure I’m saying that; my apps certainly feel like they bring more value than that to me. I like not being tethered to a landline, and being able to just hit a few buttons and make things happen.

        But that isn’t necessarily gonna translate into me being a more efficient worker bee.

        • zoomar

          Sorry to twist your words in the wrong direction. Of course, we all love our apps and the convenience of them. I just found that Brookings study interesting in the light of Uber’s dilemna. But I guess, its also a fact that Capitalism as it’s practiced now has kept the profit of the last 40 years of increased productivity out of our hands and pockets, it doesn’t really matter whether today’s or tomorrows next “disruptor” makes us better worker bees.

        • Ahuitzotl

          quite the reverse, even, it brings more value to you, partly by distracting you from work with more interesting things

      • As you said, all these clever sexy apps appear bring no more value to the table than a landline brings.

        Not only do I have two landlines (one soon to be discontinued when/if we sell the house it’s in), I had occasion to use the word several times yesterday (using one of them to talk to someone who needed all my phone numbers). And I still read that as “bring no more value to the table than a landmine brings”.

        So now I’m thinking wistfully of certain Thanksgiving dinners past.

      • nosmo king

        Heard the same story, thought it was pretty interesting. I had a couple of reactions to it:

        1) maybe people are tired of having their productivity gains skimmed off by the 1% and are giving up trying as hard (or maybe that’s just me)

        2) applications that used to be considerable time savers are now frequently updated with functions that only affect a small portion of users but necessitate updating versions, learning new commands, plugging in dongles that may get lost or stop working, subscribing to updating software that slows down the whole system, etc. (my example for this would be ProTools; I’m sure there are many others). At some point, keeping current on your software of choice impacts your ability to actually use said software.

        • Bubblegum Tate

          Oh man…I learned very quickly to not even try to update Pro Tools. I stuck on my old version until my entire computer went kaput, at which point I bought a new comp and the then-pretty-new Pro Tools 10. I have not once updated it since then. It does everything I want it to do, I have zero problems with it, I’ve never felt like I’m missing out on anything…I am not going to mess with that delicate ecosystem just to get incremental improvements in features I probably don’t even use.

      • nemdam

        Yeah, I’ve heard this too and have a hard time squaring it with the fact that automation is supposedly going to take everyone’s job in like 20 years. If productivity isn’t going up, how are all of our jobs going to be automated away? Can’t you only automate jobs away if worker productivity is going up? I’m not nearly as studied on this as I want to be, so it’s probably just my ignorance.

    • nathanw

      There’s a little more to it than just having a phone interface to the service, as has been well demonstrated every time a taxi company comes out with their own app. With traditional taxi dispatch (and the apps that just layer on top of it) there’s not really any recourse when a driver bails on you (as often happens if they find a street hail first).

      The model that Uber and Lyft have, the driver stands to lose more if they don’t honor the call – both because the equivalent of street hails don’t exist – the platform won’t make another rider available when they’re already supposed to be picking one up – and because they can be kicked off the platform if enough riders complain about being stood up.

      There are all sorts of (well-trodden) things that are bad about where the drivers are in the power relationship, but this one at least seems to work to the benefit of the riders.

    • hypersphericalcow

      > If Uber can’t do this then it basically has nothing. They know it, too. This is why they’re going so big into self-driving car research while they have money to burn; if they can eliminate their labor costs they can keep their heads above water.

      People have made this point above, but it bears repeating. The problem is that if Uber eliminates their labor cost, they now have the *massive* up-front capital cost of buying the self-driving cars, as well as the ongoing maintenance costs. Their model has only worked so far because they’ve offloaded all of that onto their drivers. Where are they going to get the money to buy this mystical fleet of autonomous vehicles? And who’s going to take care of them?

    • I think it’s more that being seen investing in self-driving cars, and flying cars reassures the investors who bought in thinking that Uber would redefine the way people use cars and other transportation. If they realized all that Uber has is a phone app with really creepy privacy issues and a bunch of down on their luck drivers, who can be exploited by underpaying them and using them as a pool of suckers for terrible car finance deals of which Uber gets a healthy cut, well then they’d leave in droves. But the headline chasing management of Uber knows one thing really well: how to raise investment capital.

  • liberalrob

    I tried.

    I’m single so when I need to put my car in the shop for whatever I need a ride back to my house after dropping it off (and another to go back and get it). Uber was a godsend; my Ford dealership signed me up with them and I was immediately a fan.

    Then I read all this stuff here about how ludicrous (and often evil) Uber is, so I thought OK, I’ll drop Uber. I found an app on Google Play called “Curb” that purported to work with cab companies to get you an actual cab. So I loaded it up, got my account all established and the next time I needed a ride I tried to use it.

    Fail.

    I could not get the thing to submit my request. 500 error after 500 error. I finally gave up and used Lyft, since it’s supposedly marginally better than Uber. But what a disappointment. Until there’s a more reliable ride-summoning app for taxi service, Uber and Lyft will have a niche to fill.

    • DaftPunk

      I put my bike in the car and ride home. Take the bike back to the shop when the car is ready. Roller blades, skateboard, mass transit, YMMV.

      • Bill Murray

        I often drive friends to and from car repair appointments. I guess I could charge them for this, like Uber, but I like spending time with and helping my friends, so provide this service at a price that Uber can’t match. I also am putting a few bitcoins into my moral bank, to be cashed in when I need something similar

    • guthrie

      Some of us just use the telephone, shockingly backwards that we are.
      And even my local to work cab company has an app thingie now, in North Lanarkshire in Scotland!

    • I get a loaner from the dealer. When you drive an Audi you can get that kind of service.

      Audi service ain’t cheap, however.

  • Dilan Esper

    There are 2 problems that Uber addressed. One is there was a ridiculous undersupply of taxis due to local licensing and rent seeking. The second is that a lot of taxi drivers were bigots who refused to do business with blacks.

    Flooding the market with taxis helped on both points.

    However, Scott is right that it is an unsustainable Ponzi scheme, and Uber has destroyed the effectiveness of good regulations as well as bad ones.

    One lesson for liberals is we control most big cities and should have fixed taxi service years ago. We didn’t even though it was black people, who reliably vote for us, who suffered. That’s a moral stain.

    • Ronan

      How does it solve 2? Because there’s so much more competition drivers can’t be as choosy?

      • Dilan Esper

        Basically, yes.

        I hate to sound like Matt Yglesias here, but curtailing supply is crucial to making discrimination stick in the absence of de jure segregation. In more competitive markets, you can’t cede a large customer base to competitors.

      • djw

        Also a lot of discrimination comes from declining attempts at hailing. App-based car service model eliminates that.

        • JKTH

          “Eliminates” is an, uh, optimistic way to describe it. “Reduces” isn’t even necessarily certain.

        • IS

          Provided the person hailing has a smart phone, data plan, and credit card.

      • Ronan

        Both can be fixed without uber though ? Making it easier to get a licence increases supply, whereas an app based service is just a technical detail that could be implemented industry wide without uber.(I take the point that neither of these might have been incentivised by the industry pre uber, but theoretically neither needed uber)

        • malraux

          Something like Uber was probably the best way to break the medallion system in lots of cities. In the cities where the medallions were limited in supply and owned by individuals rather than the city, the medallion owners have a strong incentive to oppose change, whereas citizens have a weaker incentive to push for change, even though they might collectively benefit more.

          • Domino

            This reminds me of a story I read about a guy in Chicago who owns multiple taxi medallions bemoaning how Uber and Lyft were going to make him broke. Looking up how much a medallion cost, he owned over a million dollars worth of them.

            Really hard to generate sympathy for me there…

        • djw

          Both can be fixed without uber though ? Making it easier to get a licence increases supply,

          That assumes the political can opener in cases, as in many American cities, where the undersupply of licences is largely an artifact of the political power of a reasonably powerful lobby.

          • Dilan Esper

            And it’s exactly my point in my OP. Liberals in charge of big cities (and conservatives too, where they were in charge), let this fester.

            Uber shouldn’t have HAD to come in and blow it up. This only happened because people running cities allowed the taxi medallion holders to call the shots for so long, giving Uber its business opportunity. And the fact that this was done at the expense of urban blacks makes it even worse.

            • SIS1

              Uber functions as a livery in NYC and are not allowed to make street hails. What Uber did then was greatly increase the livery supply, and as this article describes, they can be competitive by running at a loss against the existing livery companies, so this “innovation” will eventually implode unless they magically get

              I would add that Uber does NOTHING for anyone without a smartphone (they ain’t cheap), so it seems to me this service is generally nothing more than aide the gentrifiers go further afield. I doubt the masses in East New York are big Uber users.

              • Dilan Esper

                A smartphone, at Metro PCS, is $30 and costs $25 per month for the data plan.

                Seriously, the people here implying that poor people don’t have smartphones are REALLY stretching things.

                • SIS1

                  Implying all poor people have smart phones is stretching things even more. Additionally, to use Uber you also need a credit card or debit card, and no, not every poor person has access to banking services as well.

                  The real movers of poor people in transit underserved areas are going to be jitneys or dollar vans or other completely unregulated services that take cash as payment. Not only because they take cash, unlike Uber, but because they are even cheaper than something like Uber.

                  Here is a quick article looking at Uber’s servicing of poor communities:

                  https://mic.com/articles/124648/uber-vs-cabs-in-nyc-neighborhoods-in-one-chart#.uL0ReT5uF

                  It references a 538 article on the issue.

                  https://fivethirtyeight.com/features/public-transit-should-be-ubers-new-best-friend/

                  The point is that Uber does not serve poor people any better than yellow taxis. The biggest difference is service in gentrified Brooklyn, since Uber drivers are more likely to show up to Williamsburg and Park Slope and Carroll Gardens than yellow taxis.

                • Dilan Esper

                  1. Prepaid debit cards also exist.

                  2. You are a shill for the taxi industry.

                • Because they have smart-phones they’re not really poor.

                  (Every conservative I’ve ever spoken to)

                • SIS1

                  Says the Uber-shilling a-hole. Any more anti-worker, pro sexual harassment companies you like to support like a syncophant?

                  Also, I noticed your utter lack of response to the data I provided showing that your claims that Uber serves the under served better to be nothing more than idiotic talking points. But of course you don’t reply to it – that would require you to put up your own data, and we all know how hard that is for shills.

              • djw

                Yeah, my last phone purchase (the least fancy smart phone they had) was 29 dollars with a contract.

                Over 90% of New Yorkers had a cell phone a couple years ago, and the savings associated with a non-smart cell phone are rapidly vanishing. This particular talking point has not aged well.

                • liberalrob

                  Also, I thought poor people all got Obamaphones. Among the many other secret luxuries they all get…

                  I would think the barrier to poor people using Uber is the same as it would be for regular taxis: the rides are expensive, compared to mass transit.

                • djw

                  Also–I’ve been pretty poor, and you know what I never spent money on when I was poor? Someone driving me and me alone from point A to point B in my own private car. Even at Uber’s subsidized rates, it’s not an efficient or cheap way to get around. Public transit was much cheaper, so when I wanted to travel distances too far to walk, that’s what I used. Very occasional taxi/car service rides for unusual and specific circumstances may be a necessity, but generally speaking it’s a luxury poor people probably can’t afford. Indeed, a poor person in today’s world is more likely to be able to afford (and, in fact, almost certainly need) a cell phone more than car service.

                • bassopotamus

                  I agree with djw. If you can’t afford a phone or some sort of credit card, you probably can’t afford a taxi/uber/lyft very often either.

    • D.N. Nation

      My I-took-one-economics-class-in-college feelings on the Uber Issue are that we have three transportation options outside of self-, which are:

      1) Taxis, which are regulated but have high barriers to market entry, not all of which do the public any good;
      2) Uber, which isn’t regulated and has low barriers to market entry, which doesn’t do its workers much good; and
      3) Public transit, which usually isn’t funded enough.

      In a perfect world, I’d prefer we have 3 winning the day, but I’m from Atlanta and am thus no pollyanna. (Address our 2.5 subway lines, libs!) So if we’re in the titanic struggle between 1 and 2, then lessen the huge undertaking that goes along with being employed by 1, but make 2 give its employees healthcare. Something like that. As far as the racism of drivers goes, law-mandated sticks instead of carrots?

      Then of course is the matter of the gig/freelance economy and then I just think we’re kinda boned in the broader sense.

    • I have a vague memory that livery drivers were illegally accepting hails in very busy locations, and that Uber or Lyft enlisted then.

      I remember a friend calling me a town car to get from Queens to Manhattan to thirty years ago and insisting it was illegal, but he was usually full of crap.

    • In São Paulo Uber does not serve most low income regions in the area, where the population is mostly Black. I don’t know how is this in the United States, but Uber is a crappy solution for discrimination in transportation.

  • applecor

    Lots of businesses have both (1) stock with significant value and (2) no proven path to profits. Are they all Ponzi schemes?

    Not to say Uber isn’t evil, but that’s a different issue.

    • Murc

      Lots of businesses have both (1) stock with significant value and (2) no proven path to profits. Are they all Ponzi schemes?

      There’s a difference between “no proven path” and “no plausible path.” A rather big one.

      Amazon did not have a proven path to profits for a long time. But it had a very plausible one.

  • sam

    Particularly in a place like NYC, where Uber is still required under the law to use licenced taxis/livery cars for its UberX service (instead of any schmo with a drivers license), it really just functionally replaced the old outer borough “call your local car service for a ride” system with an app. The same drivers/cars were doing the driving – after a few years a lot more potential drivers have gotten into the “business”, but we already had a pretty built out private livery service here that could really just be “app-ified”.

    And now, of course, that app-ification has ported over to the actual taxi industry, where we have Curb (which works for both yellow and green cabs). so when Uber eventually collapses in on itself due to it’s ridiculous business model, we will hopefully retain at least some of the technological improvements in the rest of the system.

    I don’t know how things will ‘reset’ in places that didn’t have taxis (or had minimal taxi service) before now.

  • Owlbear1

    Next step for Uber?

    Car2Go subscriptions!

  • Spider-Dan

    I always thought it was openly acknowledged that Uber’s intended business model was to subsidize fares (via burning through VC money) until they achieve monopoly status, then jack up rates back to what taxis cost now. Is that even a controversial statement?

    As far as I can tell, the only “increased efficiency” Uber brings is the same one that Airbnb brings: evasion of regulation. If we simply eliminated taxi regulations, Uber would not even have a whimsically optimistic path toward eliminating cab companies.

    • djw

      But the folly of this model should now be apparent. Their future monopoly pricing will be undermined by new entrants. The low cost of entry, thanks in part to new technology, was made readily apparent by a company called Uber.

      • Just_Dropping_By

        Except that it’s not even a new entrant problem — Uber can never reach monopoly status in the first place because traditional cab companies are scalable. They may shrink and/or become less profitable, but, as long as there is an airport and some large hotels in a city, traditional taxi service at a cab stand will remain viable to at least some degree and stand ready to cut into Uber’s market share if it starts raising prices. (I’ve been pointing this out for as long as people have been shitting themselves about how Uber was going to kill existing cab companies; I’m glad other people are finally waking up to the issue.)

        • sam

          The main thing this seems to have done in NYC is devalue taxi medallions, which are actually not scalable – you can have “black cars”, which are call-to-order livery service, but only medallioned taxis can pick up street hails.

          In NYC, the price for a medallion had ballooned to the point where they were simply unaffordable to anyone but the super-rich. They had become an investment for a certain segment of the taxi owning population, often garnering well over a million dollars when one would come up for sale. To the extent that a large number of medallions were being held by a small number of deep-pocketed “moneyed” interests that viewed them as an investment and who basically leased taxis out to poor immigrant drivers at exorbitant rates?

          I’m not that sorry to see that system get taken down a peg or two.

          More on the tyranny of the medallions: https://priceonomics.com/post/47636506327/the-tyranny-of-the-taxi-medallions

          (every time the city has tried to issue more medallions, the medallion owners have protested/sued/etc. to stop it)

          • Just_Dropping_By

            Right, in a medallion system, the number of taxi cabs aren’t scalable up, but they are still scalable down (in the sense that you could have fewer than all medallion-bearing taxis on the road), which was my point. The panic two years ago or so was that Uber was literally going to put cab companies out of business, but a huge part of that fear seemed to be based on a failure to recognize that taxi cab companies have at least some margin to shrink the size of their operations to fit with a reduced market share. Taxi cab companies are not like steel mills or aircraft manufacturers where they have a huge amount of their assets tied up in huge, impossible to liquidate on a fractional basis, factories and specialized equipment.

      • Spider-Dan

        Future entrants will face a rather significant barrier to entry: access to billions in VC cash to underwrite your subsidies.

        So from that standpoint, Uber’s business model makes more sense. While the first-in-the-door examples of this business model are able to drum up funding for this scheme, it’s going to be harder for future competitors to do the same when Uber already exists.

        • djw

          Future entrants will face a rather significant barrier to entry: access to billionsin VC cash to underwrite your subsidies.

          We’re talking about some future date when monopoly is achieved and the goal is actual operating profit.

          If Uber’s business model requires permanent massive VC infusions, it’s not really much of a business model.

          • Spider-Dan

            Well, it wouldn’t require VC infusions after they have Achieved Monopoly Status; they would simply raise rates.

            And that’s the point: Uber-as-monopoly wouldn’t have to worry about a new startup doing the same thing to them that they did to the cab companies, because such a startup would require billions of dollars in VC funding to subsidize their fares.

            So while Uber may have been able to raise that kind of dough with promises of “disruption” and “innovation,” that can’t work again. Even if this hypothetical Ponzi-based transportation market could actually put Uber out of business, the company that replaced them at the top would be vulnerable to the same strategy. There would be no sustainability.

            • Scott Lemieux

              they would simply raise rates.

              But not only is this not an answer to the barrier to entry question, it ignores the fact that demand for taxi service is highly elastic. Uber can’t charge market rates without losing a lot of customers. (And if somehow ridership held up with unsubsidized rides, then competitors would obviously have no problem raising venture capital.)

              If Uber has a path to profitability, it’s not going to the the Standard Oil model.

            • djw

              And that’s the point: Uber-as-monopoly wouldn’t have to worry about a new startup doing the same thing to them that they did to the cab companies, because such a startup would require billions of dollars in VC funding to subsidize their fares.

              No, they wouldn’t. If Uber, in the future as a monopoly, is overcharging beyond cost of operating+very small profit, someone can come along and charge COA+VSP and undercut them.

    • malraux

      But once they become a monopoly, what stops a competitor from starting. If there’s a large hurdle to someone starting up, they can hope to hold onto a decent profit, as someone else has to clear that hurdle. But Uber is an app. No cars, no employees, no real estate. So someone else can build an app, hire on the same drivers, etc, and become a competitor if there’s any profit to take.

  • No Longer Middle Aged Man

    It’s all people who have this quasi-religious belief that technology will solve every problem known since the dawn of time

    It’s always a relief for me to read or hear other people saying this. A large portion of my students hate when I point this out, also that the present era is not exactly the first one where technology has had a massive impact on human lives and that the internet and the cell phone might not be the most transformative inventions since the wheel (hint: steam engine, steam ship, automobile, radio etc.)

    Many people, including a surprising number who are willing to part with their own money, seem unable to discern the distinction between “there’s almost certainly a viable business model in many locations for a cell phone based service that provides transportation for a fee” versus “that service is destined to be a monopoly and Uber is a gold mine.” See Groupon. Rinse, repeat.

    • erick

      When they started selling and delivering groceries on the internet my dad said “when I was a kid we had a milk man who delivered milk every day, they quit doing it because the cost of labor was too high, how does the internet change that?”

      • MacK

        It’s no so much that the fish of labourers too high as (a) milk was UHT treated and homogenised so it kept longer, making buying 4-5 days worth practical; (b) people undervalued the convenience of milk delivery – and were unwilling to pay for it.

        Time was milkmen brought butter, eggs, cream, and fresh roasted coffee beans too. I remember ones who even brought bacon and Irish/English sausages and bread.

        • N__B

          I’ve heard tell that some delivered fresh spermatozoa.

          • MacK

            Fish — wow, the iPad voice app is creative

          • wjts

            I know what’s going on, Pat Mustard!

      • liberalrob

        Milkmen only delivered milk and maybe dairy. “Internet” delivers everything.

    • hypersphericalcow

      > A large portion of my students hate when I point this out, also that the present era is not exactly the first one where technology has had a massive impact on human lives

      Hell, crop rotation and horse collars transformed European civilization, and those were a millennium ago.

      • No Longer Middle Aged Man

        I was thinking about crop rotation (medieval history major in college) and the metal bit, which made it much easier to control horses and led to the chariot among other things, but figured too obscure.

        • Chetsky

          During the first Internet boom, somebody (well-known, famous, but I forget the name sigh) pointed out that both electrification and refrigeration had far greater impacts on life, than the Internet. I personally think refrigeration was …. gynormous. The idea of carving up giant blocks of ice from Arlington (MA) pond, and shipping them swathed in straw to Africa and India boggles the mind, and refrigeration ended that.

      • The stirrup revolutionized warfare.

  • erick

    I think Uber is going to find out that treating all their employees as contractors cuts both ways. In order to maintain the legality of treating them as contractors with no benefits and so on that means they have to truly be independent, meaning they can go work for anyone else as well.

    There are basically two things needed for their business to work, the app and the network of drivers in every city. The app didn’t require any magic technical break throughs, it is fairly mundane. The network of drivers is the real key. Basically Uber is recruiting and training the employee base for their potential competition, it isn’t like Amazon where being first and creating an economy of scale has a lasting advantage – unless they pay a premium to the drivers to keep them exclusive. A new taxi service that is based on an app for calling and paying independent drivers that cuts out the taxi company monopolies could be easily created by cities as a public utility for example and charge a small fee so the bulk of the revenue goes to the drivers vs. a bunch of libertarian tech bros who aren’t adding any real value.

    It seems the only way their buisness can survive long term is driverless cars, but again what is their technical advantage? What do they have that will let them build better driverless cars than car companies? The app is trivial so why would Tesla or BMW need Uber vs just creating their own service?

  • MacK

    Because I travel a lot, I’ve been able to see the cities in which UBER works and those where it doesn’t, or is ceasing to work. To take and example consider New York, where taxi medallions had risen to a price of about 1 million dollars, and were largely on by investors who charged the taxidrivers to drive what were pretty clapped-out Ford Crown Vics carrying those medallions. Effectively in the dialogue is extracted most of the fare out of every ride leaving a very small amount of money to be spent on paying the driver after gas for the car, etc. In those days were made sense for the drivers because for a lot less than It cost them to rent a medalioned wreck for the day, they could own a decent Town Car and keep most of the revenue – plus they got the long high-fare runs. UBER made big inroads into the business in every city with overpriced medallions. It made much less progress in cities and jurisdictions without such unfair systems. In London, the knowledge plus restrictive vehicle rules meant a shortage if drivers and ludicrously expensive `Black Cab from LTI – UBER offered a lower cost route into the industry.

    But when you go to say Germany, where Taxi drivers make a decent living, drive e-class Mercedes and have coops to handle call-outs, or similar cities around the world, in the US or Europe – there are few UBER cabs. There just was no economic benefit to the drivers. And now un New York, as `Medallion prices have crashed, the logic of Uber is in trouble.

    UBER thrived on a market disfunction where an actor was extracting excessive ‘rents’ from drivers, by taking a smaller rent – but if the ‘rents’ fall, UBER’s model gets into trouble.

  • applecor

    This stuff is really starting to make me laugh.

    In the late 80s, as a BigLaw junior associate I had complained around the office that the taxi company that provided us with our client-subsidized late evening rides home was extremely unreliable, despite our being in a prime pick-up location in the Boston financial district. One fateful day after hearing this from me, a senior associate smiled knowingly, scribbled a phone number on a piece of paper, and said “The next time you need a ride home, just call Joe”.

    I didn’t really understand but I did call Joe the next time. He said “hang on a sec” and 30 seconds later, he was back on the line with “someone will be there in 4 minutes”. Sure enough, someone was, and was on time thereafter every time I called Joe.

    What was going on? Joe was a driver with a major Boston cab company who had a newfangled piece of technology called a cell phone. He would call (maybe via conferencing technology, I don’t know) the other drivers in his grey-market network, and find out who wanted to take my ride and when they could be there.

    This was nearly 30 years ago. Meanwhile, I called a traditional cab company JUST LAST MONTH and could not be told within a half hour when they would arrive (aside from refusing to arrange in advance to meet me at a public transit stop).

    Meanwhile, traditional cab drivers not only discriminate against POC but also continue to refuse to drive white people to wealthy suburbs if they think it will be hard to find a return fare.

    As long as these problems apparently cannot be solved by traditional cab companies, I have to think Uber has a shot even if at some point they are no longer competing on price.

    • Just_Dropping_By

      (aside from refusing to arrange in advance to meet me at a public transit stop)

      The demand for exact street addresses for cab pick-up rather than an intersection is possibly the most irritating thing. I know it is for the driver’s safety, but at the same time it’s insane in a world of ubiquitous cell phones that allow you to make a call without regard to whether you happen to be standing inside a building.

    • N__B

      Can’t say for Boston, but I’ve got an Uber-like app on my phone that tells me where empty NYC cabs are and let’s me send up the LAZY signal to call them. (I haven’t taken a cab by myself since my leg was in a cast twenty years ago, but I occasionally use them with Mrs__B or Mini__B.)

  • Whirrlaway

    If you could monetize the sort of people who used to pick up hitchhikers, who were going that way anyway (commuting from Catskill or something) then there’s some marginal efficiency to be extracted. But hitchhikers have all been dangerous lunatics with rusty knives since the hippies turned to speed.

    • Bill Murray

      I was a hitchhiker once and am marginally not a dangerous lunatic.

      My friend and I were going from Salt Lake City to Rock Springs Wyoming because one of our friends car was totaled in an accident on I-80. My friend’s car had a hose burst near Park City, so we went to the west bound lane and hitched a ride back to SLC with a trucker who claimed to have been at My Lai and said that the last hitchhikers he picked up had tried to rob him and he had beaten them to a bloody pulp. We were properly scared but we managed to get back, get my car and contact our friends at the McDonald’s at which they awaited our arrival

      • Domino

        So if he was My Lai, he was one of the guys slaughtering civilians, right?

        I mean, Glenn Andreotta died a month after the incident, so that would make him either Hugh Thompson or Larry Coburn to be on the side of people trying to save women and children from being gunned down.

    • It seems to me that any time someone is murdered they were either hitchhiking or picking up a hitchhiker.

      I theorize that every so often one murderer picks up another murderer hitchhiking. And THAT is how we get abandoned cars by the side of the road.

  • jake

    That Horan guy’s analysis is bunk – Uber passengers paid 79% of the cost of their trips, not 41%.

    Uber are a bunch of assholes and it’s not clear that they have a viable business. But it does seem plausible that technology and scale should let one get more passenger miles per hour out of a car and driver than a traditional taxi company or car service, right?

    • Aaron Morrow

      Wrong.

      To repeat, there are no economies of scale to take advantage of as Uber does not own its own fleet, and technology is not magic.

      Without any evidence to challenge Uber’s 60% subsidy of fare costs, I declare your argument bunk hooey.

      • jake

        Here’s the Naked Capitalism post where the 41% figure comes from. Scroll down to the spreadsheets and look at the 1H2015 column.

        Riders paid $3.7B in fares. Uber immediately paid $3B of that to drivers, keeping $660M as revenue for itself. Uber then spent $1.6B running its company, losing $1B. Riders paid $3.7B, investors paid $1B, total of $4.7B. $3.7B is 79% of $4.7B.

        Now, Uber’s revenue ($660M) was only 41% of Uber’s costs ($1.6B), but that’s because Uber doesn’t consider fare costs as revenue.

        Does this count as evidence?

  • gkclarkson

    Yeah, I guess it’s a Ponzi scheme, but I’m not exactly losing sleep at night over a bunch of venture capital billionaires burning piles of money, especially when the general public’s getting subsidized rides out of the deal.

    • applecor

      When venture capitalists burn money, they are mostly burning other people’s money, including money invested by pension plans.

      • And the people they enrich tend to be libertarian assholes who use their newfound wealth to wage war on government spending for education, transportation, water utilities or any other thing they hope to buy up and take over at a ruinous cost for the rest of us.

  • njorl

    One of two things might be going on:

    1-Uber is duping investors out of money. They subsidize rides to create rapid growth. The rapid growth entices investors. Part of the new investment goes into the founder’s pockets (though stock sales), part goes into ride subsidies. lather rinse repeat.

    2- Uber is price suppressing the cost of rides to eliminate competition. Kill off taxi companies and Lyft and the lower end car service companies, then increase prices to well above cost when the competition is dead.

    Neither is a particularly healthy business practice.

    • NonyNony

      Uber execs insistence that their future is in self-driving cars suggests 1 to me. It seems like a way to keep investors on the hook while they bleed a few more years of money out of them.

      (Some have compared it to Netflix having the mail order model while maintaining that streaming was their future. The difference is that the mail order service was mildly profitable and had a clear business model behind it while Uber really doesn’t)

      • liberalrob

        Forget self-driving cars, they want to give us self-flying cars. There’s a whole lot of pie in their sky…

        • Every time someone has tried to build a flying car they’ve ended up with something that’s a shitty car at the same time as being a shitty airplane.

  • thispaceforsale

    Neither the ends nor the means justifies ubers prosperity

  • Aexia

    Uber was pretty great for DC.

    Pre-Uber, DC cabs didn’t take credit cards and had all the usual service issues – calling was unreliable, racist drivers, refusing to take you to destination, etc.

    People forget that Uber started with just the luxury black car service (now called Uber Black) which was more expensive than cabs, probably 15-20%.

    Uber got a foothold in DC despite charging significantly more. That’s how bad the cabs were.

    In recent years, cabs have gotten their shit together – they accept credit cards, they’re better behaved, cars are cleaner and nicer. Before I deleted Uber, I was just using it to summon cabs.

    Uber’s entrance in the market did a lot to improve things for everyone. People need to recognize that and think about how they let things get so bad that people would pay a premium not to use cabs.

    • Chetsky

      You’re absolutely right. I’ve read both up-thread and elsewhere, people basically saying “geez, is the rent-farming in local taxi-like service SO entrenched, that we gotta invite in another monopolist to displace (or ameliorate) it?”

      And it seems, that’s about right. I think the political scientists here could tell us why that’s an expectable situation, but still and all, it makes one depressed for the future of humanity, that we can’t solve this problem. There’s always some asshole sitting on the key bit that needs fixed, extracting his rent from that bit not being fixed.

  • I’ve used both cabs and Uber to and from various airports and I’ve had mixed results with both.

    The last Uber driver I had was driving a pretty ratty car and he was complaining that he couldn’t really make any money driving for Uber.

    • cpinva

      “The last Uber driver I had was driving a pretty ratty car and he was complaining that he couldn’t really make any money driving for Uber.”

      you raise an important point about Uber. as near as i can tell, they have no enforced, uniform standards, regarding either vehicles or drivers; any idiot with a legally running car can be an Uber/Lyft driver. you pays your money and takes your chances. at some point, even Uber’s VC money well will run dry. without that, they don’t have a reason to exist.

It is main inner container footer text